American history is replete with uprisings against overbearing government: think of tax-weary colonists throwing tea into Boston harbor or the Reagan Revolution of 1981, where voters demanded a respite from regulation. Today, leading figures in the cryptocurrency industry are at a breaking point of their own, issuing a collective cri-de-coeur against the SEC.
The first outburst came from Circle, the Boston-based exchange whose CEO Jeremy Allaire has for years boasted about his firm’s good relations with regulators. So much for that. A Circle blog post lambasted the SEC for its bewildering thicket of legal tests, and accused the agency of moving the goal posts in its dealings with the crypto industry.
Next came Kik, the Canadian messaging service turned crypto giant, which launched a project called Defend Crypto to make a legal stand against the SEC. Kik donated $5 million and others have put in money of their own, including venture capitalist Fred Wilson, a Kik board member and longtime crypto champion. In a broadside on his blog, Wilson seethed against the SEC’s overreach: “Image if a user had to go to a securities brokerage firm like Schwab to purchase a token in order to be able to use Apple’s App Store.”
Crypto folks, of course, have fulminated for years about the government. Indeed, the founding of Bitcoin itself was very much a declaration of independence by cypher-punks from federal authorities. What’s different this time is the current uprising is being led by people who have long preached patience and compliance with the feds. While their protests are rooted in self interest—looser securities laws would make it easier to raise money—their fears, including of the U.S. losing the crypto lead to other countries, may be legitimate.
That doesn’t mean they will succeed. The “Defend Crypto” strategy of pressuring the SEC and, ultimately, bringing about relief from Congress is an uphill battle. Meanwhile, some say the protests are misguided.
Berkeley academic Nicholas Weaver says the SEC’s “if it quacks like a duck” test for securities is just fine when it comes to crypto, while lawyer Preston Byrne was more acerbic: “Don’t take legal advice from VCs,” Byrne said of Wilson’s blog post, adding “In my experience, fighting Uncle Sam is not a good idea, even if a large chunk of your cap table says it is. What’s best for entrepreneurs may not be what’s best for preferred shareholders.”
For now, it’s too soon to say how the crypto rebellion of 2019 will turn out. History teaches us that some revolutionaries go on to become great national leaders—while many more are simply hanged. For the industry’s sake, let’s hope Kik and Circle know what they’re doing.
Three parting notes: 1) Thumbs up to Nathaniel Whittemore for his excellent Twitter round-up of Sunday crypto long-reads. 2) Thumbs down to the AP Style Guide, whose “don’t say crypto for cryptocurrency” advice we will ignore. Crypto, crypto, crypto. 3) We can’t wait to see some of you in Montauk for Brainstorm Finance in just over two weeks time. (We’ll have a livestream for those who can’t make it).
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