Another week, another Ken Paxton lawsuit against federal overreach, this time on the cutting edge of cryptocurrency regulation.
A group of states is suing the Security Exchanges Commission (SEC), claiming the commission is overstepping its authority in regulating digital assets like cryptocurrencies — arguing that the SEC’s actions stifle state-level innovation and impose federal control without congressional approval.
Eighteen state attorneys general have joined the lawsuit, one of which is Texas Attorney General Ken Paxton, in addition to DeFi Education Fund, a nonpartisan research and advocacy group.
Along with naming the SEC directly in the complaint, it also lists SEC Chair Gary Gensler, among other officials.
If Gensler’s name rings a vague bell, it may be because he was the chief financial officer for Hillary Clinton’s ill-fated presidential run.
The states want the court to stop the SEC from enforcing regulations and allow them to manage digital assets with their own laws.
“The SEC’s sweeping assertion of regulatory jurisdiction is untenable,” the suit states. “The digital assets implicated here are just that — assets, not investment contracts covered by federal securities laws.”
“They do not entail any traditional investment relationship, in which the investor invests capital and the promoter assumes an ongoing obligation to use that capital in a common enterprise to generate returns that the investor will share.”
The lawsuit goes on to explain that the laws defining what counts as an “investment contract” were written in a clear way, and past U.S. Supreme Court decisions support this definition. Because of this, the complaint asserts, the SEC does not have broad authority to regulate all digital asset transactions as if they were securities. The argument is that the SEC is overreaching beyond what these laws and past rulings allow.
The complaint, filed in Kentucky district court, is asking the court to declare that digital asset transactions are not considered securities if they don’t involve a promise to manage assets for profit. They also want the court to stop the SEC from forcing digital asset platforms to register as securities-related businesses if they don’t meet those conditions. Additionally, the states claim the SEC broke rules by not following proper procedures.
Snip.
While on the campaign trail, President-elect Donald Trump vowed to protect the blockchain industry, making a bevy of promises to crypto enthusiasts.
Trump took the stage at the Libertarian National Convention back in May, where he promised to stop “Joe Biden’s crusade to crush crypto.” In July he said he would “fire Gary Gensler” on day one of his new administration.
“No longer will your government sit by and watch as Bitcoin jobs and businesses flee to other countries, because America’s laws are too unclear and too tough and too angry and too stiff,” Trump said while delivering the keynote address at a Bitcoin conference. “We will keep each and every Bitcoin job in the United States of America, that’s what we’re going to be doing.”
Texas has become a major center of the crypto and Bitcoin industry in America. Sen. Ted Cruz (R-TX) is a vocal advocate for the emerging finance sector, and Gov. Greg Abbott signaled he will continue to be friendly to the crypto community, describing himself as a “crypto law proposal supporter.”
There’s a long-running debate about just what the hell cryptocurrencies are under federal law. Unlike other securities (say, a stock or bond), a unit of cryptocurrency is not a token that represents a tangible legal entity in the real world. It’s not a currency as traditionally understood, as it is not backed by specie or the power and authority of a government. It’s not a commodity, because what commodity can be moved across the world at the speed of light?
If it doesn’t actually fit the profile of anything that legislation has specified that the government regulates, then maybe, as Paxton et al assert, then the federal government shouldn’t regulate it. That would seem to be the proper constitutional interpretation under the Tenth Amendment.
While I’m still skeptical of the long-term usefulness of cryptocurrency (though with Bitcoin hovering around $90,000, I sure wish I had mined some back when it was easier to do), the Trump Administration is filled with very smart people who believe in Bitcoin and other cryptocurrencies. History teaches us that it’s best to let new technologies shake out without government interference, so let’s hope Paxton and company’s lawsuit succeeds.
Tags: Bitcoin, DeFi Education Fund, Elon Musk, Gary Gensler, Greg Abbott, Hillary Clinton, Ken Paxton, Lawsuit, Regulation, Republicans, SEC, Ted Cruz, Tenth Amendment, Texas
“…the Trump Administration is filled with very smart people who believe in Bitcoin and other cryptocurrencies.”
History is full of the record for “very smart people” who “believed” really, really hard in a bunch of arrant idiocies, as well. South Sea Bubble? Tulip craze? Any of that ring bells?
Frankly, looking around myself at the current “product” of all these “very smart people”, I’m a little less than impressed by it all. Sure, there’s been a lot of crap that’s really cool, and all sorts of neat, but… Was it a good idea, over the long haul?
I would remind everyone that we still haven’t quite worked out all the implications of the first Industrial Revolution, as of yet. And, here we are on what is arguably our fourth or fifth iteration of that event.
I am skeptical about the (very?) long term viability of fiat currencies, which have a fatal flaw in that they can be created out of thin air to advance political agendas. Is crypto a better model for currency? Too early to say. While crypto is also created out of thin air, its creation is at least bounded by hardcoded limits, as well as the limits imposed by the resources needed to create it.
Well stated, enough to sway me. I’m a skeptic of cryptocurrency for all the reasons you noted as to what it is not. Setting aside for a moment the currency aspect; most of what people are doing with Crypto can be done with other investments including foreign exchange (FOREX) trading. I rather have my investment backed with something tangible. I understand the argument for Bitcoin, but the other crypto currencies seem to be a shell game with obvious flaws.
On the swaying me, let’s bring back the currency issue. Americans can’t trade against the US currency. Technically you can buy other currency with US dollars, but if you trade it at any appreciable levels, then you can run afoul of various statutes created to protect how our currency works. The obvious exception to this is cryptocurrency trading, because they skirt the statutes since it isn’t foreign exchange currencies. Except it is, as cryptocurrency is accepted in many places as currency. For this reason, I figured eventually the US government would regulate it, and that would be the end of the nirvana.
Except, the US government didn’t regulate, when it would have made sense. Maybe SBF and his FTX company bought them off, I don’t know. What I do know is it didn’t act. Now that they want to act, I rather they stay out, and as stated, let it shake out. Also agree with RC Dean above, which is the basis that to me separates Bitcoin from the others.
The problem with all of this BS starts when you sit down with someone who’s proselytizing for it, and ask them to explain it to you.
I’ve yet to find any of them that can. You’re sitting there with them, and it rapidly becomes quite clear that you’re basically dealing with the equivalent of a Mormon missionary or Jehovah’s Witness, but for some weird electronic money thing that they’re “true believers” for, but which they can’t explain. They just “know” it’s valuable… Why? Faith, I suppose.
I’ve also had these conversations with similar sorts of people discussing things like blockchain authentication in terms of using it as substitutes for all sorts of weird transactions they come up with.
The NFT thing really blew my mind, because even though one of the guys trying to sell me on the ideas behind it had just lost over $20,000.00 in real money because someone had somehow gotten into an imaginary “wallet” somewhere, and taken control of it, which meant that… Something-something-something, lost the money.
I am not a smart person, but I have noticed that when people can’t clearly explain things, and don’t notice all the contradictions in what they’re trying to relate to me? There’s usually a problem.
The only real difference I’ve noted between the crypto types and the people I’ve known who fell for Nigerian Prince scams or some loony “I met a girl online who loves me…” things is that the crypto types are so cocksuredly certain of their own intelligence and wisdom that you can’t even begin to penetrate the bullshit.
I figure the whole thing is going to come crashing down at some point when the “willing suspension of disbelief” evaporates. I mean, OK… You buy gold as a store of value: End of the day, you’ve got the gold, you can do something with it. You buy BitCon (spelling deliberate…) and… What? Can you get back all the electrical power that went into “mining” it? Where’s the value? What’s tangible about that “asset”? All you’ve got is actually less than a slip of paper… Which you could have used as tinder for starting a fire to keep warm, which is all that a dollar bill will be good for at the rate they’re going.
The whole thing is nuts, the triumph of “wish” over “reality”.
If you could somehow unravel a BitCon “thing” to get back the electricity invested into it? You’d have something; as it is? You have nothing, not even a real symbol.
And, yeah… I get that money is basically an imaginary concept, a game we play. The whole deal behind BitCon is a bit too abstract, too “imaginary”. I can hand you a tangible asset like a gold coin, and you’ll likely agree that there’s some value there; try that with a BitCon once the networks crash, and let me know how it all works out. If you could put the damn things into your power cord, and get some energy out of ’em? Maybe you’d have something, but so long as it’s only an imaginary value? LOL… People’s imaginations only go so far.
We stand at a bit of a watershed moment for government policy regarding cryptocurrency. Right now, the US exerts a great deal of soft power because Middle Eastern oil is priced and traded in dollars, and the need for liquidity in dollar markets makes exclusion from SWIFT something like a naval blockade, without the expense of, y’know, actually deploying the Navy.
Historically, the formation of eurodollar markets allowed an uneasy balance between local control of banking policy and US strategic policy. (Most “Eurodollars” are in East Asia these days, but the 60’s-era term persists.) Improved information technology has now given US policy makers more visibility and centralized power in the US.
The advent of cryptocurrency puts us at a juncture. Dem-party orthodoxy is to stymie cryptocurrency and preserve domestic mass-scale surveillance, invasive taxation, and extra-judicial asset seizure. If they succeed (not likely now that most of the key crypto-haters in DC got schlonged) then crypto development will flee abroad even more than it has already and crypto-ized eurodollars and Bitcoin-as-the-new-gold will take root, removing the visibility that makes the modern blockade-by-bank-sanction formula work. Domestic spying of the sort that entrenches deep-state power will be preserved, so America loses but Washington DC wins.
A more enlightened cryptocurrency policy will bring dollar-backed crypto “stablecoins” to the masses, both in the US and abroad. (Also well-developed markets will allow hedging Bitcoin’s price swings.) This will impede suspicionless mass-scale surveillance, but with US banks backing the cryptocurrency circulating worldwide, preserve the ability to pursue macro-policy through soft power. In that scenario, DC loses but America wins.
Whatever else you think about cryptocurrency, it isn’t going away, and keeping things as they have been is not an option.
I’m pretty sure the stablecoin dream died when Luna and Terra went tits up, belying the “stable” part of the name. There seems little incentive to use a cryptocurrency demonstrably less stable that fiat greenbacks…
The entire idea of currency in this day and age is a bit nebulous.
Try this on for size: We go to gold as the standard. Oh, look here… Elon Musk or one of his successors just hauled a mostly-gold asteroid back into Earth orbit, and we’re now drowning in the crap. It’s dropped to commodity pricing, and only used for industrial purposes and the shiny-shiny jewelry market. Brilliant move, that…
Alternatively, we start using doing currency as some exotic artificial element, a la “gold pressed latinum” or something… Then, someone figures out how to make it for cheap. Same issue; loss of stored value.
Philosophically, I’m not all that sure how you get around this issue. Say you decide to base it on labor; then someone develops workable AI and robots that can replace people… Huh. There goes that idea.
You start looking at it, and fiat currency ain’t all that bad.
I think part of the problem here is that people want to have “forever” as a key component of all this, and the sad reality is that there’s no such thing as “forever”. Consider the old spice trade; once upon a time, if you showed up with a box of nutmeg, you could have bought a farm with it. Other spices were equally valuable and represented a hell of a lot of value; today? You can go down and buy those spices at the supermarket for literal fractions of a fraction of what they cost the old nobility in Europe.
It’s amazing when you look at it… I was once talking to a friend who was working out a time-travel novel. Key plot point? The protagonist needing to take something back in time to Revolutionary War-era America that he could use for trading purposes. Turns out, having done the research, all he had to do was go down to the local market and buy up a bunch of spices, then play itinerant trader. Nutmeg, for example? Worth more than gold for the weight.
Basically, had you set currency values on spice values from back in the day? Your entire economic basis would have evaporated by today, what with all the commoditization of the trade.
I’m not sure that there’s anything that is really “forever”, in terms of this. Conditions will always change, values will always shift, and you can’t really set a “forever” gold standard… I mean, what the hell happens to the value of gold if some bright light comes up with a means of cheaply extracting it from sea water…?
“I’m not sure that there’s anything that is really ‘forever’, in terms of this. Conditions will always change, values will always shift, and you can’t really set a ‘forever’ gold standard… I mean, what the hell happens to the value of gold if some bright light comes up with a means of cheaply extracting it from sea water…?”
The Byzantine Empire had a gold standard for the entirety of its thousand year existence. Compare this to the silver Roman denarius, which was continuously adulterated and debased. Following The Diocletian reign, which accelerated this trend, the Roman Empire featured endemic social upheavals. In the end, Rome was depopulated and impoverished.
When evaluating the comparative worth of exchange mediums, we are not faced with an “all or nothing” dilemma; we simply decide which choice is marginally superior.
We are not tasked with selecting a “forever” currency. This is a metaphysical question to which economics has no answer. If you want to attain eternal value, lay up for yourself treasure in Heaven, where the moth does not eat nor the coinage rust.
@Lawrence Person: TerraUSD was, in industry parlance, an “algorithmic” stablecoin, and it is well understood now that this approach is the financial equivalent of a perpetual motion machine. Unlike early implementations like NuBits, Do Kwon can not plausibly claim ignorance, and most of the proposed crypto regulatory schemes make such schemes expressly illegal.
That leaves two other ways to implement stablecoins: redeemable and overcollateralized. The latter use mostly BTC or ETH as collateral and set up a bunch of derivative markets to hedge the volatility in the underlying asset, therefore requiring I think something like 25% to 50% excess collateral to cover price swings. They are algorithmic in a sense, but rely on assets whose main utility is something other than speculating on demand for a particular stablecoin. ETH, for example, has over 50x the capitalization of the stablecoins it collateralizes. LUNA was supposed to be a general smart contract platform, but in reality TerraUSD was the tail that wagged the dog.
Redeemable stablecoins are backed by cash or cash equivalents, so when there is a run on the coin, (as happened in the May 2022 crash of Terra) market makers will buy the stablecoin at discount (Tether traded at 95 cents for a few days) and sell it in blocks of $100,000 for bank deposits in Singapore or wherever. The big problem with today’s redeemable stablecoins is that fear of asset seizure prevents Tether (who already hold more Treasury debt than most central banks) from releasing detailed audits of their reserves. The best reason we have to trust the liquidity of Tether is their performance in the face of the massive, $40 billion I think, redemption. How many traditional banks can survive that?
With a clear and sensible regulatory regime, openly audited reserves, and reasonable protection from arbitrary asset seizure, redeemable stablecoins will likely dollarize the world, supplanting SWIFT, the Wolfsburg consortium of correspondent banking, and probably the bottom 20% of national central banks.
Here’s my problem with crypto: in the long run, it’s exactly the opposite of cash. The ledger is PUBLIC. Eventually, it WILL be decrypted, and every transaction will be laid bare. We’ve seen how banking can and will be politicized, to the extent of unpersoning people for badthink. Crypto is sold on the idea that it will protect from that… but instead, it just kicks the can down the road a number of years, after which point all transactions are retroactively made public (or at least become visible to those with sufficient decryption capability).
Kirk is correct regarding the underlying problem. A currency is supposed to be a measure of value, but in a fully free and open market, ALL values are constantly shifting according to supply and demand. Worse, the one fundamental unit of value is human physical or mental labor–modified by factors which include time, ingenuity, circumstance, and demand, which are the parts that Marxists failed to comprehend. You can’t create a stable yardstick of value from human ingenuity, and you can’t measure it except by comparing it to the value of other things through a market.
So what does that leave us with? What’s a fair price for a dozen eggs, that is simple enough for the average person to ballpark in their head and determine whether it’s reasonable or not? We need a currency in order to simplify what would otherwise be an unending series of barter transactions that would wear out most people. And yet, we can never truly get one, because all monetary value is relative (even specie–look at Spain and its economic miseries after it looted the Americas for vast amounts of gold).
I’ve never come up with an answer. The best I’ve got is a fiat or semi-fiat currency backed by a strong military and wealthy economy, managed (to the extent that it is, because markets) with an aim to keep inflation at around the level of population growth. In other words, what we generally have when the treasury is not being quietly (or sometimes noisily) looted. Milton Friedman was right.
@ A. Nonymous,
One of the things I think that nobody is currently paying attention to is this: WTF do you do when you’ve basically entered into an era of anti-scarcity, when everything you’ve done economically in the past is predicated on… Scarcity.
I’ve been wondering for years how the hell the American economy hasn’t crashed… I remember when everyone was panic-mongering over the national debt going over a trillion, back under Reagan. How f*cking quaint that seems, now…
What I suspect is that the economy has edged over onto the early terraced steps leading to the effervescent highlands of a post-scarcity state of affairs. And, we don’t have a damn clue how to deal with it…
Consider this: Not all that long ago, over 90% of the labor force was engaged in farming. What is it, today? Best guess I can find says: 1.62%.
How the hell can you even begin to think that the old assumptions and understandings are even slightly “correct”, these days?
It’d be my guess that we’re in entirely unexplored territory, and that nobody has a damn clue about what goes where, how it works, and/or how to manage things.
Give a thought to the eventual state of affairs, wherein most of agriculture is performed by robots of one form or another. What then? What are the implications, in terms of “how do we keep people busy/contributing to the economy?” Do we even need to…?
If you draw out the trend lines, with the reduced need for human labor to keep ourselves fed as one, along the line of how many people are being born…? At some point, they meet. Then what?
Other question: What the hell happens when the population begins noticeable implosion, and the villages and towns are emptied out, along with some of the cities? Where is the equilibrium point going to be? Can we keep things going, with only a half billion Chinese citizens, for example? How about here in the US, where nearly all of the population growth is immigrants? What do you do when you’ve successfully convinced everyone not to have kids? Start mandating them? Tell the young women that they don’t get civil rights, until they’ve contributed kids to the future?
You’re going to see all sorts of draconian bullshit come in, when all the leftoid freaks figure out they’ve overshot the whole “reduce the population” work order.
The world of the future isn’t going to look a damn thing like the one we were told was on its way. Hell, most of the assholes writing about and discussing these issues are all steadily ignoring the implications of those sub-replacement fertility rates, quite literally whistling past the graveyard.
I don’t think we’re entering post-scarcity yet. I am unsure if we ever truly will–the universe itself is mortal (entropic), which imposes a degree of scarcity at the highest levels. I would argue that what you posit is more along the lines of “post-labor”. And yes, that is every bit the sci-fi horror scenario you suggest, because most humans have a psychological need to feel useful, as well as a need to occasionally be grounded in reality. Without a sense of personal accomplishment, what will happen to peoples’ minds? We already know (to some extent) what happens when people grow up without being grounded in reality: they subscribe to simple, fantastical theories (e.g., socialism) that don’t work in the real world, and begin to lose all connection with what was once termed “common sense”. Illiteracy–and perhaps even worse, innumeracy–rapidly follow (note the rapid onset of substituting AI drivel for one’s own efforts at learning a subject). Next thing you know, you have Idiocracy… or at least people who think a billionaire could give 300 million people a million dollars apiece and still have plenty left over.
As far as the baby crunch goes: while I’ve cooled a lot on Zeihan over the years, particularly as his personal politics have intruded upon his forecasts, to his credit he’s been ringing this alarm bell for well over a decade now, and has the demographics charts to prove it. My suspicion is that we could see something akin to the aftereffects of the Black Death, only taking place over a much longer timeline. Barring a true post-labor economy, however, things will eventually get to a point where the remaining tax base can no longer even pretend to support the non-working… at which point safety nets begin to collapse, and suddenly, your best retirement policy is once again to have sufficient numbers of children and grandchildren who love you enough to help support you in your old age or infirmity. That would take care of the problem in the long term, but not before much wailing and gnashing of teeth.
If we DO somehow get to post-labor… I don’t really know what that would look like. Science fiction has dabbled with the concept, but usually in a fantastical way (e.g., Rodenberry’s Redshirts signing up to die in droves for no other reason than “to expand the human condition” in a society that decries markets and money as outdated concepts). UBI gets tossed about a lot, but look at the psychological damage that handouts do to people who never had to deal with the real world as a result. I have a hard time imagining a successful post-labor human society.
I personally have no idea how post-labor economies might work or even look. I am profoundly suspicious of the idea of “leisure-focused” culture. I just don’t see it working out, at all well.
I suspect, too, that we’re in for a lengthy period of stagnation when the population starts dropping. Won’t be enough bodies to keep everything going, and I suspect that the workload in terms of paying taxes and all the rest will lead to a lot of people saying “Screw this…” and just checking out. All those “childfree” types are going to find it damn hard to argue with the next generation of people that weren’t “childfree” that they ought to be taking care of them or paying for their retirements. It’s at that point that the Ponzi scheme which is Social Security is going to blow up. Gonna be a huge black market economy, when that day comes.
Demographics and math are inexorable. I don’t think that a lot of people in charge of things have quite worked out the implications, and since we don’t work on a long enough timeline… It’ll be ugly.
What I do think will wind up happening is going to be a huge sea-change in how we do things. People are going to have to be more mindful about how they raise their kids, and those kids are going to have to be cognizant of what their duties are towards society, ugly as that sounds to our ears.
Hopefully, we’ll come out of the whole thing a lot better at self-regulating and being mindful. Low odds on that one, but you can hope…