Laundromat Tokens. That’s what Gary Gensler, Chair of the SEC, compared the state of cryptocurrency to.
The wild west of crypto, as we know it, is coming to an end.
Since Bitcoin’s inception in 2009, the confusion around whether cryptocurrencies were actually currencies or not has remained up in the air. While the original intention was to have a cashless method of payment without any middlemen — time dictated otherwise.
By the time Ethereum rolled around in 2014, cryptocurrencies were already treated more like investable assets rather than spendable currencies. The ICO craze in 2017 solidified this concept, as people treated crypto more as shares in a new venture. It was actually these fundraisers that ended up grabbing the attention of the SEC.
It became apparent that these were no longer just opensource tech projects, but rather multi-million dollar operations that any average person to buy into.
“Kennedy and Crypto” — a letter written by Chair Gary Gensler in the SEC details the need to essentially weed out which projects are classified are securities, and which are utility.
That’s right — the multitudes of shitcoins are now being sorted, tossed, and regulated.
The Fall of Crypto ”Currencies”
Crypto being treated as a security is nothing new. Actually, the SEC has been onto this for a while. What this letter addresses is actually further classification of crypto as a whole:
Of the nearly 10,000 tokens in the crypto market,[2] I believe the vast majority are securities. Offers and sales of these thousands of crypto security tokens are covered under the securities laws. — “Kennedy and Crypto”
The majority of crypto can be classified as securities for the sole reason that most people expect some sort of return on their initial investment in the coin. Because the concept of a “security” from US Congress is quite broad, most people buying crypto are technically making an investment in a security.
It’s safe to assume that we may see some changes in how we buy crypto — as well as what cryptos are able to be successfully registered as securities.
These are not laundromat tokens: Promoters are marketing and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others. — “Kennedy and Crypto”
No more currencies — cryptoassets here we come!
Is this good or bad? (spoiler: GREAT FOR TECH & WEB3)
Overall, I view this as a huge positive in this industry. It’s the nail in the coffin for legitimising this tech, as contradicting as that sounds.
While this may be unideal for some of the currencies, this is huge for the tech that powers it — like blockchain — as said by the SEC:
It’s not about whether you set up a legal entity as a nonprofit and funded it with tokens. It’s not whether you rely on open-source software or can use a token within some smart contract. — “Kennedy and Crypto”
What this does is legitimises not only the usage of regulated digital currency but also the technology behind it. This means that now big tech can start getting involved in streamlining some of this technology.
This separation of whether a digital asset is a security or not is quite important. For example, NFTs are not only used to represent value — sometimes they are used to represent access or the like. This in the long term will help creators ensure they are not infringing upon any pricey regulations.
While this is not the point of web3 technology, it will enable for a more mainstream approach and wider acceptance of the concept of web3. Companies can now thrive and innovate with blockchain and another web3 tech without worrying about the gray area of the law.
Conclusion
I’ll call that wraps for now! The future of how value is measured and perceived is being changed before our very eyes. Not only that, but the tech driving it will also achieve wider adoption following this.
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pce out!
This article was first published here.