Bitcoin Unfazed By Regulatory Actions

Bitcoin Unfazed By Regulatory Actions

Time Stamp: February 13, 2023 11:51 AM
Bitcoin Unfazed By Regulatory Actions PlatoBlockchain Data Intelligence. Vertical Search. Ai.

Bitcoin is holding out above $21,000 despite unprecedented action by the Securities and Exchanges Commission (SEC), though not directly related to bitcoin.

Their decision to stop staking at Kraken, one of the biggest and a regulated US based crypto exchange, sent eth’s ratio from 0.072 BTC to 0.068, but beyond a slight dip for bitcoin, it does not seem to have had much more of an effect.

One reason might be because the staking offered by Kraken has been differentiated from staking itself.

Coinbase for example continues to provide managed staking, with Brian Armstrong, Coinbase’ co-founder, stating:

“Coinbase’s staking services are not securities. We will happily defend this in court if needed.”

Since SEC is engaging in regulating through enforcement, any of their enforcement action can be differentiated. There was therefore no action against staking, there was action against Kraken’s specific staking.

The bUSD action is more peculiar because there is no difference between it and USDc, but USDc keeps operating with no statement otherwise.

Here, we can differentiate in a very different way, politically. Is the Biden administration taking revenge against Binance, could have been another headline, with the assumption being yes.

There have been numerous Binance specific actions recently, including banks severing relationships, but only for Binance not crypto as such.

A tweet in November by Changpeng Zhao, Binance’s CEO, kicked off market frenzy regarding the well connected FTX.

FTX donated millions to primarily Democrats, and the current SEC chair Gary Gensler was close to FTX’s founder Sam Bankman-Fried.

Still, why didn’t Paxos decide to fight SEC or the New York Department of Financial Services (NYDFS) considering there’s some $16 billion of bUSD on the line and a very lucrative business?

$1 million or $10 million in lawyers fees seems a small cost, but Binance has seen a Proof of Keys run of its own and we’re at the depth of a bear market, so some crypto entities may be a bit poor.

Not all. Coinbase has gone through numerous bear markets. For Binance this is the first real one. Coinbase therefore has learned and very well that you need a big cushion for rainy days, so they have billions in cash.

The obvious danger here is regulatory monopolies, as Coinbase can become, but that’s just for US.

It does though raise the question whether the rule of law is being thrown out of the window in the United States. Cowboy governance back in full view just when US’ rock bottom global reputation was starting to recover.

Regardless, it seems that some US crypto entities have found the answer to this regulation by enforcement, and the answer is basically ‘it wasn’t me’ that got sued or got some action so that specific action does not apply.

And that’s fully legal because for anything to be binding, SEC has to get a court ruling, and from a senior court like the Court of Appeal or of course the Supreme Court or obviously a law from Congress.

District Court rulings are more like quarter on quarter GDP growth, very volatile and not binding, not even on other District Court judges, so they are basically worthless.

There has been no higher court ruling on any relevant aspect of the crypto space as far as we are aware, so SEC is not quite making law yet, just bullying to settlement whoever they can.

This distinction therefore is right. Kraken should have fought them. They chose not to, so nothing to do with staking, just Kraken.

Same for Paxos. They should have gone to court. They did not, so nothing to do with stablecoins, just Paxos’ stable.

And if they have nothing to do with stablecoins or staking, then what on earth do they have to do with bitcoin or eth?

Because when you’re forced to dance, then why not enjoy the dance. The music is fine too, so if SEC wants to regulate through enforcement, we keep operating through differentiating.

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