SEC

SEC Chairman: Bitcoin Is Store Of Value But Needs Greater Investor Protection

07/05/2021 by Idelto Editor

SEC Chairman Gary Gensler recently recognized bitcoin’s value but called for greater investor protection through increased regulation.

Gary Gensler, the new head of the U.S. Securities and Exchange Commission (SEC), told CNBC that he recognizes bitcoin as a “scarce store of value,” distinct from other “crypto tokens” which “are indeed securities.” But he also alluded to a perceived need for additional regulations around its investment and use.

“It’s a digital, scarce store of value, but highly volatile,” Gensler told CNBC. “And there’s investors that want to trade that, and trade that for its volatility, in some cases just because it is lower correlation with other markets. I think that we need greater investor protection there.”

According to Gensler, such investor protection would be similar to what is currently in place in stock and futures exchanges. In addition, he believes there needs to be an authority that brings “anti-fraud and anti-manipulation authority … to the crypto exchanges.”

Gensler, who has taught blockchain and cryptocurrency classes at the Massachusetts Institute of Technology (MIT), later added that he believes the SEC should be “technology neutral” when it comes to market innovations.

“We need to update and freshen our rules to ensure that, while retail investors and any individual has First Amendment rights to speak and so forth, that they’re not misleading the public, they’re not manipulating the public, manipulating the markets,” he said.

The extent of the regulation that Gensler is calling for is unclear. However, the typically-skeptical Bitcoin community could see this as a sign that increased governmental intervention in bitcoin is forthcoming, which could hurt bitcoin adoption and ultimately be detrimental to the U.S. economy and its technological innovation ethos.

Ghana Regulator Labels Crypto Transactions Illegal— Urges People to ‘Stay Away From Them’

04/05/2021 by Idelto Editor

Ghana’s Securities and Exchange Commission (SEC) recently warned residents of the West African country to avoid cryptocurrency transactions of any form. In the warning, the regulator reiterated that “cryptocurrencies are illegal in the country and are not regulated by the commission hence Ghanaians should stay away from them.”

Risks Associated With Crypto

In remarks made during an interview, Paul Ababio, the Deputy Director-General of the (SEC) asserts that “there are risks associated with cryptocurrencies and people have lost funds to such transactions.” However, despite issuing the warning, Ababio does hint that his organisation might eventually decide to regulate the crypto space.

(The) Bank of Ghana does not treat it as a form of payment, it is not a legal tender but we will be engaging further to come out with frameworks.

However, until that happens, the regulator urges Ghanaians to “desist from participating (in cryptocurrency transactions.)”

Paul Ababio, Ghana’s Deputy Director-General of the (SEC).

Master Plan

In the meantime, Ababio reveals that “the commission is forming a fintech round table as part of its master plan to look into some of these innovations and the approach to take.” However, he cautions that this is still a work in progress.

A number of countries in Africa are leading the race when it comes to the global adoption of crypto assets. Aside from places like Nigeria and South Africa, Ghana is one of the top countries in Africa with rising peer-to-peer crypto trade volumes.

Ghana’s government has noticed the adoption and the SEC has witnessed ostensible stories of citizens losing funds. The SEC official also took time to explain why the regulator has undertaken to study cryptos further. He said:

There are clear risks to the nature of it. People have lost their keys and they can no longer access their funds so it is something that we are studying.

While Ababio has promised “some action on that front”, he still fails to give the exact timeframe within which “the commission is expected to come out with a final decision on the matter.”

What are your thoughts on Ghana’s latest crypto warning? Please share your views in the comments section below.

Ripple’s Chris Larsen Believes Bitcoin Dominance Could Fall Over Proof-of-Work’s Energy Consumption

25/04/2021 by Idelto Editor

Ripple Labs cofounder Chris Larsen has a bone to pick with bitcoin and crypto networks that leverage proof-of-work (PoW). Larsen’s latest write-up explains that the crypto industry needs to reconsider PoW because of the effects on the environment. The Ripple executive believes that other types of consensus algorithms have been effective at being secure while only “using a tiny fraction of the energy.”

Ripple Cofounder Believes Crypto Networks Leveraging Proof-of-Work Should Consider Alternatives

While the global economy struggles after a year of Covid-19 lockdowns and business shutdowns, a great number of people are very interested in tackling climate change. Ripple Labs cofounder Chris Larsen has written a blog post about the environment and why the crypto industry should reconsider leveraging PoW. Larsen believes that if the Bitcoin (BTC) network’s verification model doesn’t get addressed, then at some point, it will lose out to a crypto asset network that does.

“With more individual investors and corporations taking significant bitcoin positions— PoW is heading for levels society will find tough to tolerate as the world works to avert a climate disaster,” Larsen’s blog post says. The Ripple cofounder notes that Bitcoin network participants have been committing to renewable energy and green sources of fuel, but Larsen stresses this is only “part of the solution.”

To Larsen, consensus algorithms that leverage proof-of-stake (PoS) have “proven effective in securing their stored value while using a tiny fraction of the energy.” He understands that a consensus algorithm is necessary to validate transactions and keep the blockchain secure.

Larsen says that the crypto industry has had a decade to review these alternatives and also noted that many PoS and non-PoW coins have captured over 43% of the entire market capitalization.

“Today, non-PoW-based coins (including Ethereum’s anticipated switch) make up 43% of all cryptocurrencies by market cap, and the majority of new cryptocurrencies introduced today choose to eschew PoW. It’s clear which way the trend is moving,” Larsen explains.

The Ripple executive adds:

The XRP Ledger has been using Federated Consensus to validate transactions and secure its public ledger for almost nine years. It’s closed 62+ million ledgers without downtime, uses the energy equivalent of just 50 U.S. homes per year, and is already carbon neutral.

A Myriad of Studies Claim PoW’s Security Strength Is Superior to Federated and PoS Systems

Larsen’s blog post covers a comprehensive look at all the negatives involved with PoW consensus algorithms. However, the blog post doesn’t go over any negative arguments against the security and vulnerabilities associated with PoS and non-PoW coins. There’s a myriad of papers and studies that have been written over the last decade that indicates PoS algorithms have not proven to be as secure as PoW. For instance, Ripple’s Federated Consensus or any type of federated blockchain mechanism has been considered centralized in comparison to networks like BTC.

For instance, blockchain and fintech attorney Nikhil Mehta from Smithamundsen LLC has said that Ripple’s issues with the U.S. Securities and Exchange Commission (SEC) were invoked because the regulator thinks XRP is a security due to centralization.

“The SEC has already indicated that bitcoin and ethereum are not securities due to their decentralized nature, which is a hallmark of blockchain applications”, Mr. Mehta stressed in his paper. “Ripple, on the other hand, is viewed differently by the SEC, which has taken the position that the development and distribution of XRP was conducted by Ripple in a centralized way,” he added.

Further, Larsen’s paper fails to mention the PoS coin networks that have been attacked on various occasions during the last decade. One example is how Tron’s Steemit acquisition exposed vulnerabilities within delegated-proof-of-stake networks. PoW and PoS systems also have different attack costs, and one paper notes that the attack costs for a PoS protocol can be down to zero.

“In fact, if the attacker’s motivation is large enough (and this is common knowledge), he will succeed in his attack at no cost,” the paper highlights.

Ripple’s Chris Larsen addresses in his paper that he wouldn’t consider PoW models outdated, but that maybe these types of networks should be separated from those that provide low energy/low carbon verification systems.

“We should see PoW for what it is — a brilliantly designed technology that is becoming outdated in today’s world,” Larsen’s blog post details. “In no way does this suggest that bitcoin and other PoW cryptos themselves are outdated. Their widespread adoption speaks for itself. But they need to separate themselves from this early technology that is not built for today’s climate needs, and embrace low energy/low carbon alternatives to secure their ledgers,” the executive adds.

Plenty of Papers Have Knocked Bitcoin’s Use of Energy

There has been a myriad of papers, studies, and complaints in regard to PoW’s use of energy. Much of which has been highlighted more often during 2021’s thrilling crypto bull run. However, most of these arguments have been debunked and just recently one bitcoin miner claimed that “Bitcoin is one of the most environment-friendly financial networks.”

Moreover, there are not that many academic papers that have found security loopholes, attacks, or vulnerabilities when it comes to Satoshi Nakamoto’s proof-of-work system. Still, Larsen believes that the energy issues could be the Bitcoin network’s Achilles heel in the future.

“I would argue that such a change is critically important for Bitcoin to remain the world’s dominant cryptocurrency,” Larsen says. “PoW’s current energy demands and carbon footprint are already unsustainably high, with Bitcoin alone consuming an average of 132 TWh a year (equivalent to roughly 12 million U.S. homes), and releasing an estimated 63 million tons of CO2 annually,” the Ripple Labs executive’s paper concludes.

What do you think Chris Larsen’s opinion about PoW networks like Bitcoin and reconsidering PoW consensus? Let us know what you think about this subject in the comments section below.

SEC Commissioner on Banning Bitcoin: ‘It’s Very Difficult to Ban Peer-to-Peer Technology’

25/04/2021 by Idelto Editor

SEC Commissioner on Banning Bitcoin: 'It's Very Difficult to Ban a Technology That's Peer-to-Peer'

SEC Commissioner Hester Peirce believes that the U.S. government cannot ban bitcoin, stating that “it’s very difficult to ban something that’s essentially a peer-to-peer technology.” The commissioner is hopeful that with the new chairman who has deep knowledge of bitcoin and cryptocurrencies, the SEC can take a fresh look at some of the reasons used to reject bitcoin exchange-traded funds (ETFs).

SEC Commissioner Says ‘Very Difficult’ to Ban P2P Technology

Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission (SEC) who is also known in the crypto community as “crypto mom,” was asked whether there is a possibility that the Biden administration could ban bitcoin in an interview with Fox Business’ Charles Gasparino on Thursday.

With new cryptocurrency regulations in the works, investors are concerned whether the government will ban cryptocurrencies, including bitcoin. Some people have warned that governments can outlaw bitcoin if it becomes a risk to their financial systems. Among them are Bridgewater Associates founder Ray Dalio, The Big Short’s Michael Burry, and Ron Paul.

A bitcoin proponent, Peirce has been advocating for the SEC to approve bitcoin ETFs. Regarding the possibility of banning bitcoin in the U.S., the commissioner opined:

I think it’s very difficult to ban something that’s essentially a peer-to-peer technology. I think the goal, as with any technology, is to prevent people from using it for illicit purposes and only allow them to use it for legal purposes. That’s what I expect to happen.

Commissioner Peirce previously said that the government would be “foolish” to try to ban bitcoin, likening it to shutting down the internet.

The U.S. government is concerned about cryptocurrencies being used in illicit activities. Treasury Secretary Janet Yellen has said several times that cryptocurrencies are mainly used for illicit financing. She also said previously that the Treasury will work with other regulators to come up with appropriate regulations for the crypto space.

Fox Business recently reported that crypto regulation may start from the Treasury and the SEC is waiting for direction on broad regulatory policies on cryptocurrencies from the Treasury.

The SEC also has a new chairman; Gary Gensler was confirmed to lead the commission last week. He has deep knowledge of bitcoin and cryptocurrencies, having taught classes on the subject at the Massachusetts Institute of Technology (MIT). Gensler is also a former chairman of the Commodity Futures Trading Commission (CFTC). He is expected to impose a fair amount of regulation on cryptocurrencies. Last week the U.S. House of Representatives passed a bill mandating that the SEC and the CFTC establish a working group focused on digital assets.

Regarding the possibility of the SEC approving a bitcoin ETF this year, Peirce said, “With the new chairman, we will be able to take a fresh look at some of the reasoning that we used to deny bitcoin exchange-traded products in the past.” She added: “Frankly, Canada is ahead of us now. Not only they have bitcoin exchange-traded products, but they also have exchange-traded products based on ether.”

Do you think the government can ban bitcoin? Let us know in the comments section below.

SEC Accuses Ripple of Harassment, Asks Judge to Block Access to Some Discovery Records

22/04/2021 by Idelto Editor

The U.S. Securities and Exchange Commission (SEC) has asked the judge in the SEC v. Ripple case to block Ripple and its executives from accessing various internal records it claims are unrelated to determining whether XRP is a security. The SEC says that the “defendants do not actually seek relevant evidence, but rather seek to harass the SEC, derail the case’s focus away from its merits, and bog down the SEC with document review.”

SEC Seeks to Limit Ripple’s Access to Its Records

The SEC wrote a letter to Judge Sarah Netburn Wednesday attempting to block Ripple from accessing certain records. The letter followed the court order granting Ripple Labs, its CEO Brad Garlinghouse, and co-founder Christian Larsen (Defendants) access to the SEC’s records pertaining to XRP, bitcoin, and ether.

The order requires the SEC to search the external emails of 19 custodians for documents related to the three cryptocurrencies but denied the defendants’ requests for certain internal SEC communications considered irrelevant to the case, the letter describes.

The SEC confirmed that it is in the process of complying with the court order and “has begun reviewing tens of thousands of external emails from the identified custodians for production pursuant to the order.” The court also required the parties to “meet and confer” about whether the SEC should produce certain official documents “expressing the agency’s interpretation or views” on XRP, bitcoin, and ether.

However, the SEC claims:

It has become evident through the meet-and-confer process that Defendants are seeking to ignore the limitations of this court’s order and to mire the SEC in indefinite discovery disputes and, if successful, document review.

“Rather than meet and confer about whether the SEC should review and produce or log certain internal documents reflecting agency views, Defendants wrote the SEC with a laundry list of documents they view as ‘capture[d]’ by the order,” the commission asserted.

The list includes “the very same internal emails that the court ordered the SEC did not have to review and produce — and not just with respect to bitcoin, ether, or XRP, but with respect to ‘cryptocurrency’ generally.” The defendants also asked for “the inclusion of a 20th custodian that was not subject to the order or the parties’ prior discussions.”

This request goes beyond the “documents expressing the agency’s interpretation or views” envisioned by the court’s order, the SEC claims, adding that the defendants “have shown that they will continue to ignore the court’s rulings and demand more endless, burdensome, and unnecessary discovery.”

The commission additionally alleges:

Defendants’ approach is part of a pattern of gamesmanship with respect to discovery and the following examples show that Defendants do not actually seek relevant evidence, but rather seek to harass the SEC, derail the case’s focus away from its merits, and bog down the SEC with document review.

The defendants’ “new request that the SEC search the personal devices of SEC employees fits into a broader pattern of trying to make this case about random and irrelevant communications by SEC staff instead of Ripple’s unregistered offering of XRP,” the SEC elaborated. According to the commission, “There is no basis to believe that SEC employees used personal email accounts or devices to express agency interpretations or views on bitcoin, ether, or XRP to the market.”

The SEC, therefore, “seeks an order that resolves pending discovery disputes and bars Defendants from seeking irrelevant, privileged SEC staff materials that this court already ruled are not discoverable.” Specifically, the regulator seeks to prohibit the defendants from “obtaining internal SEC staff communications the court already excluded from production” and bar them from “searching SEC staff personal devices” and “adding custodians.”

Do you think the judge will rule in favor of Ripple or the SEC? Let us know in the comments section below.