Brooke Masters, Financial Editor at Financial Times, recently expressed concern over the SEC’s approach to cryptocurrency. She argued that trying to fit new and evolving assets like cryptocurrencies into outdated definitions is counterproductive. She opined that such attempts might not be in the best interest of the markets and could potentially destabilize the American financial sector.
Balancing Investor Protection with Market Stability
While the SEC’s primary focus remains the protection of investors, Masters pointed out the inherent challenges in the agency’s aggressive stance. Brooke Masters advised the SEC to exercise caution when addressing crypto. She believes the SEC’s approach of fitting new asset types into existing categories is misguided, as per cryptonews.net’s information.
“Trying to shoehorn new asset classes into old definitions is not the wisest course.”Brooke Masters.
Recent incidents, such as the extreme price fluctuations of Bitcoin and the collapse of FTX, have understandably prompted a call for oversight. But Masters warns that pushing the boundaries of regulation in unclear areas could do more harm than good.
The Howey Test and Ripple’s Tussle
At the heart of the debate lies the Howey Test, a nearly century-old benchmark for determining securities. The test, which originated from a Supreme Court case, became a focal point in the SEC’s lawsuit against Ripple. In the case, the SEC argued that Ripple’s past sales resembled securities under the Howey Test. Notably, Judge Analisa Torres of New York found mixed results – some of Ripple’s XRP transactions violated securities laws, while others did not.
Potential Repercussions for the SEC
The SEC’s dissatisfaction with the Ripple verdict and its decision to appeal may have unintended consequences. Masters suggests that the move might open the door for the Supreme Court to restrict the SEC’s authority on broader grounds.
A Call for Congressional Action
Masters recommends Congress step in and draft clearer regulations specifically for cryptocurrencies. She believes that while protecting investors, the SEC could also promote the market by endorsing instruments like a spot bitcoin ETF.