The US Securities and Exchange Commission doesn’t exactly have a good reputation within the cryptocurrency community, and for good reason.
Their chairman Gary Gensler has come off as overly harsh on crypto, without really knowing what he’s talking about.
And now, as the SEC battles crypto companies like Binance and Coinbase, the regulator finds itself unable to find experts in the cryptocurrency field. Why? Because of its own hiring policies.
For those who are unaware, the SEC requires that anyone employed by the SEC must divest all holdings of cryptocurrencies before beginning work.
In addition, the SEC is competing with cryptocurrencies to hire experts, in a sector that is relatively new and therefore has only a limited number of candidates.
But even then, the SEC’s policy of barring anyone who holds crypto from employment is definitely not helping- and the problem only gets worse from there.
By now, everyone is familiar with the clip of Gary Gensler refusing to answer if Ethereum is a security.
But this did not have to be the case.
Of course, whether or not Ethereum is a security is not the point. The point is whether or not the SEC has a case to make on Ethereum being a security and therefore falling under its jurisdiction.
The failure of the SEC to hire cryptocurrency experts therefore has direct consequences on the commission’s ability to actually carry out its duties- in this case properly determining if cryptocurrencies fall under their jurisdiction or deciding the conditions for which cryptocurrencies would fall under their jurisdiction.
An inability to hire cryptocurrency experts could also come back to bite in the future, as the industry becomes more established. The goal of the SEC is to regulate- but how can they regulate if they have no idea of how crypto exchanges and crypto companies work?
Certainly, it would be akin to the blind leading the blind- and to no one’s benefit.
That is not to say that the cryptocurrency industry should sit on a moral high horse and do nothing. On the contrary, the SEC’s improper handling of cryptocurrency can do real harm to the industry as a whole, as other countries imitate the US in dealing with the cryptocurrency industry.
Education, engagement, and empathy should be at the core of the industry’s strategy for dealing with the SEC, since that is where most of the industry experts are. What is needed is for the SEC to also recognise that it currently lacks the expertise that is moving towards the private sector, and to meaningfully engage with companies to formulate policies that will protect consumers while respecting business interests where possible.
Of course, this is a course of action that the SEC is unlikely to take, if we consider all that they have done thus far.
More likely than not, they will probably continue to fail to meaningfully engage with the crypto industry and continue to try to go it alone.
In that case, the least they should do is to relax the policy of barring cryptocurrency investors from working with the SEC. Just as one requires engineering experts to design machines, the SEC needs people familiar with cryptocurrency in order to better understand how to regulate the sector.
One can only learn so much by staying on the outside and looking in. Instead, it is by getting one’s hands dirty and diving in that one learns much more.
Finding out where to draw the line between too much involvement and too little involvement is not easy, but if helpful and clear rules are to be established, the SEC must first fully understand what they are regulating, and start by taking advice from people who have bought and sold these cryptocurrencies.