After all, the promise of crypto was supposed to be the opposite. They named it a revolution. This was all part of a larger movement to democratize finance, break Wall Street’s stranglehold on our economy and politics, and return power to the people. Somewhere along the way, that promise got turned on its head. Now it’s simply snatched up in this shiny, unregulated format and sold back to us.
The latest worship of “decentralization” as the crypto regulation magic secret-sauce is, to be frank, bullshit. Policymakers are rightfully guided by legal traditions, like the Howey Test. Consequently, they’re unduly focused on figuring out if a crypto network is decentralized enough. If so, it’s a “cryptoasset,” outside the jurisdiction of most regulations. If not, it's a security.
Decentralization: A Convenient Smokescreen?
Who benefits from this murky distinction? Not the average investor. Only rich people and rich institutions will be able to drive through these loopholes. They’re manufacturing convoluted designs that work around the rules, shielding elite speculators while putting regular people at greater risk of fraud or market manipulation.
Think about it: the same people who preach decentralization are often the ones hoarding massive amounts of specific cryptocurrencies, exerting significant control over the market. It’s akin to saying, “We’re going to build a decentralized utopia, except we get to own all the property.”
This focus on decentralization feels like a convenient smokescreen, a way to avoid addressing the real issues: consumer protection, equitable access, and accountability. It’s the equivalent of paying attention to the single trees in a national park while completely overlooking the catastrophic wildfire decimating the national park’s undergrowth.
Remember the GameStop saga? It taught us the possibilities of collective action, of everyday people going up against Wall Street. Crypto was supposed to amplify that power. Instead, it has turned into just another tool for exploitation, albeit with a new set of shiny buzzwords.
From Innovation to Predation: A Harsh Reality
Such as thousands of rug pulls, pump and dump schemes, and outright fraud schemes littering the crypto space. Young people, lured by the siren song of get-rich-quick schemes and financial independence, are among the most susceptible. They take their hard-earned savings and invest it, only to have it poof overnight.
As the SEC, under former Chair Gary Gensler, prioritized the enforcement of the Howey Test and more intense decentralization analyses. That’s putting in a new kitchen sink with a sledgehammer to go along with your leaky faucet fix. It misses the point. It fails to take care of the basic, underlying need for strong, sharp regulations that protect consumers and discourage fraud.
Consider buying a car with no safety regulations whatsoever. Even worse, what if there’s no warranty and no other means of recourse for when a shady dealer sells you a lemon? That’s just the brutal truth of the crypto market currently for most.
The disconnect is palpable. We hear that crypto is all about decentralizing power to the individual, but this kind of deregulation powers the predator.
Joseph Hall, a partner at Davis Polk, advises that we look to the asset, not to decentralization as an answer. Is it a lien on the underlying assets, revenues, or profits of a private enterprise or unit of government? If so, regulate it like a security. If not, treat it differently.
This makes sense. SEC disclosure rules are designed for businesses. So applying them to cryptoassets that don’t have claims on a business really doesn’t pass the smell test. It’s the square peg into the round hole analogy!
A Radical Shift: Protecting People, Not Protocols
We need a complete overhaul of crypto regulation that prioritizes the following:
This isn't about stifling innovation. It's about creating a fair and sustainable ecosystem where everyone has an equal opportunity to participate and where bad actors are held accountable.
It is time to act. We, Gen Z, demand better. We’re calling for a system that serves our safety, not corporations’ bottom lines. Call your representatives. Support organizations fighting for responsible crypto regulation. Let your voice be heard. The future of finance is at stake. Now it’s time to ensure that it’s a future we can all have confidence in.
- Stricter KYC/AML Requirements: Know Your Customer and Anti-Money Laundering regulations need to be robust and consistently enforced to prevent illicit activity.
- Mandatory Insurance for Crypto Exchanges: Exchanges should be required to carry insurance to protect users in the event of hacks or bankruptcies.
- Dedicated Regulatory Body: A specialized regulatory body with expertise in crypto and a mandate to protect consumers and promote social equity is essential.
- Clear Definition of "Utility": The term "utility" in the context of crypto needs to be clearly defined to prevent projects from using it as a loophole to avoid regulation.
| Policy Area | Current State | Proposed Change |
|---|---|---|
| KYC/AML | Often weak and inconsistently enforced | Robust and consistently enforced requirements |
| Exchange Insurance | Not mandatory | Mandatory insurance to protect users |
| Regulatory Oversight | Fragmented and lacking expertise | Dedicated regulatory body with crypto expertise and a focus on consumer protection and social equity |
| "Utility" Definition | Vague and easily exploited | Clear, narrow definition to prevent regulatory loopholes |
This isn't about stifling innovation. It's about creating a fair and sustainable ecosystem where everyone has an equal opportunity to participate and where bad actors are held accountable.
It is time to act. We, Gen Z, demand better. We demand a system that protects us, not profits. Call your representatives. Support organizations fighting for responsible crypto regulation. Let your voice be heard. The future of finance is at stake. It's time to make sure it's a future we can all trust.
