It's far from over - SEC, Coinbase, Binance and the future
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The gold market can become dull at times. Considering it is a commodity that has been traded for over 5,000 years, it is no wonder that a mature market will find stability and its marketplace becomes quiet. That is why the chatter around the gold will become stale and you will be subjected to the same regurgitated commentary for long periods of time. I for one try to refrain from torturing readers with yet another article about gold and the debt ceiling or the Fed etc.
Biting my tongue, I held back while hoping for something interesting and useful to share with readers. Alas, at this time what has come to the forefront is the future of the new technological wave of assets and their future place in the economy.
After the failure of the infamous FTX Crypto Exchange in November of 2022 many politicians took hold of this issue to portray themselves as some kind of social warriors out to protect the downtrodden from the evils of Crypto. It was actually quite pathetic sight to witness. As a person that tortured myself by watching most of the Congressional hearing in December of 2022, I was shocked at the rampant ignorance often being spewed by these same politicians on live television. Literally, more than half of those that got a few minutes to speak did so to get on camera. I’ll tell you, if they knew how incredibly dull-witted, they appeared, they may have taken a pass. But I guess, they just pray that their constituents did not make the time to see this event and only bothered with the fodder fed them by the media giants which are there to make the politicians path easy and not to share the truths that are revealed.
What was revealed was the attempted politization of a new industry that is here to stay. There is absolutely nothing the US government can do to change that, try as they may. But what they believe they successfully did was to demonize an industry. However, somehow the truth came out and most people are fully aware that what Sam Bankman-Fried and FTX were running was nothing more than a Ponzi scheme built around a new industry. The people that lost money with this enterprise were not like the bank depositors of our recent bank failures First Republic, SVB and Signature. They had no protection, of course they knew that getting into it, this was all new, the wild west. They lost their money. The average person was not in this market. This event has changed that, and more people are now in this market than ever before.
The clamor from the politicians was for the SEC (Securities Exchange Commission) to take responsibility. However, nothing is clear about this new industry and the SEC is a regulatory body for the offerings of securities and the exchanges. Now of course, they have found their way to sue Coinbase and Binance over some things that they have no authority to do. It is often the case that they are entering the void of the new market as well to keep their position as the be-all of the investment market. As the world changes so do its operating entities.
Questions though are, where will the fines from these firms, that previously were not under the regulation of the SEC, and in the case of Coinbase allowed to become publicly listed, knowing full well their business model go? Extracting fines will go to what end? Where are the defendants that were hurt by these businesses? Is this just a ruse for a money grab to feed the coffers of the state? These are some questions running through my mind.
However, more importantly is that the real issue has not been addressed in a public forum where the Congress driven by their constituents are supposed to propose to the nation the path forward. No one voted for the SEC’s employees in office, and they do not have the power to determine for themselves what is or is not a security. The representative of the people must do this. Last I knew, this is a country for the people and by the people, not for the bureaucrats and by the bureaucrats. They are a self-interested part of this historical situation we find the digital markets in, and the debate needs to be taken up by our representatives. It’s time our elected officials started doing the most important part of their job. Making sure the bureaucrats do not run rampant without any controls over the people and innovation.
I have read the charges against Binance and Coinbase. As I expected, there is some truth mixed with convictions that should not be made. In my estimation, Binance definitely has more to be concerned with than Coinbase. There are some allegations against Binance that very much mirror that of FTX, which is grave. Yet, in the area of what is or is not a security cannot be left to the SEC to de determine. There are many offerings that are a commodity and others that are clearly a security. The definitions and parameters to discover what laws apply must be made by outside of the SEC. But for now, I thank God that Coinbase and Binance are two big boys and will need to and can fight this tooth and nail. While this is in the courts of justice it needs to be directed to the halls of Congress who created the SEC in 1934.
This morning I was subjected to a childish rant by one investor from the crypto space, via a Substack post, who is upset that there a certain Bitcoiners (Bitcoin only zealots) that do not support the rest of the crypto market. Frankly, I would be embarrassed for having written such tripe. Who worries about what the competition thinks? Do you think the guy who started Coca-Cola was worried about what the lemonade guy was thinking and whether he would support him or not? My wife would blame this attitude on the person being born a millennial, which apparently means, spoiled brats. I personally think they showed their weakness and concern that they may have a problem. Yes, there is one, but it will not kill the industry, grow up.
The death of digital assets is far from a reality. In fact, I personally believe that these are the birthing pains that will bring forth a new brighter future in a few years and the strong and honest will survive. Those that live on the edge and don’t want to follow the new rules and regulations that will be forthcoming will be removed forever to the dustbin of history.