Industry leaders warn U.S. SEC against certain types of “enterprise adoption”
It’s been ten years but the cryptocurrency industry still seems to be in its nascent stage. But slowly and steadily it’s making its way in our lives and cryptocurrency has become a part of our daily parlance.
While there is a growing demand for regulations to guide the cryptocurrency industry, there is also a feeling that extra care should be taken while drafting the laws regarding “enterprise adoption”.
Taking a step in this direction several prominent leaders representing nearly every aspect of both traditional and cryptocurrency finance have jointly submitted a letter to the U.S. Securities and Exchange Commission (SEC) urging the regulator to modernize its methods, according to a Forbes report.
The group includes stalwarts from various fields, like former Morgan Stanley managing director Catlin Long, bitcoin core developer Bryan Bishop, and founder of Ernst & Young’s blockchain team Angus Champion de Crespigny among others. The letter warns the SEC in no uncertain terms against certain types of enterprise adoption.
The letter goes on to say, “Digital assets differ in material respects from traditional securities and other financial instruments. We believe that fitting them into existing market infrastructure introduces risks to investors that would not otherwise exist. In fact, it may be possible for market infrastructure to be updated to take advantage of Bitcoin and other technology, further strengthening the financial system.”
‘U.S. SEC should bring more players on board’
Among a number of recommendations made in the letter, Bryan Bishop, who has been contributing to bitcoin’s core code since 2014, argues that the biggest change the SEC needs to implement is to partner directly with cryptocurrency engineers to develop a new kind of regulation.
The letter also issues a strong warning against comingling of assets. It says:
“By storing all customer funds in a single place and lending out or otherwise investing the stored cryptocurrency, the process known as “commingling” could devalue bitcoin by creating more liquidity than there are assets to back it and this could possibly lead to devaluation. Commingling creates a “honeypot” for hackers to attack, and the ability of financial institutions to manage this security risk is likely to vary widely.”
The letter argues that restrictions should be put in place to keep a check on the working of Bakkt, ICE’s planned cryptocurrency exchange that is scheduled to open in November.
The letter also cautions the Commision against applying rules to cryptocurrency that do not reflect their strengths.
The letter concludes by recommending:
“We believe that current SEC rules surrounding custody do not reflect the risks inherent in managing digital assets and do not use the technical strengths of the technology. These technical strengths have the potential to lead to a stronger, more robust custody environment. To better understand these possibilities, to build to strengths of technologies, and to not harm its advantages, we recommend that the SEC engage with those who are experienced with technology, such as cryptographic engineers, software developers, Bitcoin exchanges, smart-contract designers, blockchain developers, and existing digital-asset managers to ensure best practices are implemented.”
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