The Good, the Bad and the SEC

A lot has changed since our last update on Friday. Bitcoin is now officially considered legal tender in El Salvador, and lawmakers in Ukraine’s parliament have approved legislation that would help clarify the digital currency’s legal status.

After receiving this green light, the pending legislation will go to President Volodymyr Zelenskyy.

On the other hand, the U.S. Securities and Exchange Commission has been making life difficult for Coinbase recently.

The program under scrutiny is Coinbase Lend, a planned feature that would allow users to lend their stablecoins to other users for an annual yield (APY). At the time of this writing, the APY would start at 4%.

Such programs, if allowed to flourish, could become quite problematic for the U.S. government, which typically offers lending rates that are inadequate at best.

For now, financial institutions tend to continue lending money to the government through the bond markets for lack of a better option.

Can you imagine what might happen to existing governments if the free market were allowed to decide lending rates? They might go bankrupt.

The real reason

Of course, the SEC probably isn’t thinking that far in advance. Their current tirade is taking place under the auspices of investor protection, but more specifically, this has to do with the legal definition of the word “securities.”

Rather than provide this clarification publicly and transparently, they continue to pester individual companies and claim infractions, even though those companies are forced to act according to their best judgement due to the lack of clarity.

We thought things might be different under the new SEC leadership. SEC Chair Gary Gensler certainly understands these issues better than most of us and definitely better than his predecessors. So clearly, understanding was never the issue.

The main issue here seems to be that the SEC doesn’t make the laws, which is the job of Congress and the president. The best the government agency can do is set precedent by winning court cases.

It’s a terrible way to make new laws, and it seems that the high hopes we had for Gensler may have been overly optimistic.

Whether or not any of this is the cause for the recent decline in crypto prices is anyone’s guess. I would say that looking at the long term charts, the crypto markets are looking rather stable lately, as we can now define a grand range for bitcoin between $30,000 and $60,000. Any movements within those borders is probably just noise.

It’s really great to write to you all again, and I really appreciate all the messages of encouragement you have been sending me lately.

It’s my main source of inspiration and my motivation for writing.

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