My understanding is that the corporate framework that securities licenses require is literally impossible to satisfy when trading current public blockchain assets. As in, to trade crypto as a security on your exchange, you would need to walk up to every dev team of every crypto you wanted to trade and kindly ask them to KYC/AML every single user of the blockchain so that you could be in compliance.
In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.
And the owners of that accounting software can make the case that they should be allowed to be used in the country. Lots of companies do that, and some are even successful!
So you have to ask yourself... why isn't Coinbase making that argument?
> So you have to ask yourself... why isn't Coinbase making that argument?
Coinbase has (obviously) always been a strong advocate of distributed ledger technology, is constantly warning of the ramifications of this software being de-facto banned in the US, and has publicly stated that they have contingencies in place for moving offshore if it's economically unviable to be headquartered in and/or serve the US market.
> has publicly stated that they have contingencies in place for moving offshore if it's economically unviable to be headquartered in and/or serve the US market
They should go. Crypto has a niche outside major economies and developed countries with the rule of law.
If you go back to the 1930s, bankers protested similarly (as they did again in the late 90s). Turns out freewheeling fraud isn’t a determinant for financial centrality. Worst case: we can revisit if London or Singapore make this work, given they’re rapidly approaching being the only financial centres who will stomach this.
Here in the real world that is the software company's problem. Countries do not change their laws just to make some random accounting software company happy, unless they bribe some politicians first.
Accounting software have tons of local adaptations.
>Countries do not change their laws just to make some random accounting software company happy
Countries change laws to give their citizens access to important products. It's not about the company.
The USA didn't decide to rewrite existing telephony laws for VOIP in the 90s because they wanted to give Skype a handout, they did it because they understood the potential benefits of internet telephony for the populous.
> Accounting software have tons of local adaptations.
You can't locally adapt a ledger that is globally shared across all the other countries. Either you allow the ledger in your country or you don't.
> Countries change laws to give their citizens access to important products. It's not about the company.
And Congress was lobbied to do that and they declined. Is your argument that 'they should have done it' means 'the SEC isn't allowed to enforce existing regulations'?
I don't really care. I've got a large enough international stock allocation that if the USA loses its status as the financial capital of the world over the next several decades, I'll be just fine in retirement.
Companies like Coinbase and a16z have publicly stated their intentions to establish international arms to hedge against the US regulatory environment, and there's no reason my portfolio can't follow their lead.
I've read your comment three times and I've yet to make any sense of it for myself, but good luck to you too. I'm glad you enjoy hunting, growing food, and building things - those are some great hobbies.
The whole point of regulations is to make various business models impossible.
The job of the SEC is to enforce the existing regulations and the job of lawmakers to (maybe) change the regulations if they think it's important to make this type of business possible in the US. In doing so they have to weigh potential benefits and harms caused by doing so.
The guiding priciples behind the SEC's current mandate and the current regulatory enforcement framework in the US Securities Laws are 1)investor protection, 2)fair, efficient and orderly markets and 3)capital formation[1]. In making changes to the securities laws, lawmakers would have to decide whether these changes would compromise these principles and whether the benefit of doing so might outweigh the downsides.
An impartial observer might look at the crypto markets thus far and decide that they are not (in the main) fair, orderly and efficient and that investors have suffered significant losses due to fraud and other malpractise and decide that it wasn't worth the risk to make changes to facilitate these businesses. That said, the crypto industry has spent a very significant amount lobbying lawmakers so they may decide otherwise.
Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible.
> Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible.
I guess that's the job of congress, then. I think the SEC Stabilization Act is an excellent start. There's nothing unreasonable about wanting to broker securities on a public ledger.
> I don't think it's the "public ledger" part of this that causes the regulatory issue frankly.
Myself I think that's precisely the issue the SEC is hung up on, but we could argue endlessly about what is probably causing the regulatory issue with the SEC and what they are probably okay and probably not okay with. Meanwhile, the UK just laid out a clear framework for crypto securities exchange in their new bill, which gives an unambiguous regulatory green light to any companies who want to relocate there.
It doesn't mean that companies can't be licensed. It just means that they will move out of the USA (to another country that has strong financial infrastructure but sane securities laws like the UK), get licensed there, and exclude US customers from their platforms.
Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk.
So your statement "then you can't be licensed, simple", comes with the corollary of "the USA's strong fintech industry may move entirely offshore within the next decade." If everyone is cool with that, then yeah, go ahead and blanket ban all US residents from trading any financial instrument that's recorded on a public digital ledger.
"It doesn't mean that companies can't be licensed"
Licensed in this discussion obiviously meant the US.
"Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk."
Which is great for them I guess.
"the USA's strong fintech industry"
A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore.
Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
> A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore.
You'd better be very sure of its irrelevancy before sending it all to the UK, where they're embracing it with a clear regulatory framework. If you are right, the US pushes a small ("irrelevant") amount of crime offshore. But in the off chance you are wrong, the USA risks losing their position as the world's financial superpower. This is not a gamble you want to take if there's even a very small chance that this technology could catch on.
> Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
It gets discussed multiple times per week on Hacker News. It's talked about constantly in congress. It's beginning to polarize people so much that it creates single issue voters in both directions. The word "NFT" has been etched into the public's consciousness as a meme. Banks and central governments are issuing bonds and other paper on public blockchains. The US is itself planning a version of the US dollar with a design inspired by distributed ledger technology. More than 1 in 5 Americans own cryptocurrency now. I don't know what measure of "relevant" you are using, but it's obviously very different from mine.
The USA is the world's finance hub because it has the most reliable systems for trading financial assets, and because it has the most reliable currency. But Ethereum network transactions are pretty damn reliable too, even more reliable than wire transfers in some ways (if a bit costly at the moment). Trading on Uniswap is generally more reliable than trading stocks in my brokerage account, and I like how I can bundle multiple trades, borrows and sends together so that they execute atomically, a feature that my brokerage account doesn't support and probably never will. I like that with DeFi, I get to choose my asset-backed loan underwriter separately from my custodian, rather than them both having to be my broker (many of which charge way above market rates for margin loans). Trade settlement happens within seconds, not days. And there has been a cambrian explosion of stablecoin designs, some of them unreliable, some of them quite a bit more reliable than most government currencies.
Is any of it truly better than the current way stocks and currency are traded and held? Maybe, maybe not, but the stakes are much higher than I think most people understand. Distributed ledgers certainly offer some specific advantages that people really sleep on.
> This project, thankfully, was dropped by the Fed after preliminary study.
> USA is the world's finance hub because it has the most reliable systems for trading financial assets, and because it has the most reliable currency
We had the largest consumer market which underwrote a deep financial system. That depth and breadth, together with a rules-based system, is what fuels American financial hegemony. Between political volatility, sanctions and our archaic payment system, we do not hold out reliability as a selling point. (You have to go out to the 1910s to see American financial infrastructure being at the forefront.)
There are definitely lessons to be ported from crypto to our system. But they can come from academia and non-commercial hobbyists or be copied once demonstrated in e.g. London.
> Nope
Yes. You’re citing Q3 ‘22 materials. The programme lost the support it was limping on after Silvergate, SVB and Signatures’ failures. FedNow makes more sense anyway. (We probably wouldn’t have it without crypto.)
As a counterexample, I haven't needed regulations to be able to have great confidence that my Uniswap DeFi trades will settle within seconds. The system is extremely reliable, despite no other participant in it being regulated or even trustworthy.
In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.