In a recent episode of “The Network State Podcast” hosted by Balaji Srinivasan, Cameroon and Tyler Winklevoss, founders of Gemini, a global cryptocurrency exchange and custodian, expressed their increasing frustration with the U.S. Securities and Exchange Commission’s (SEC) cryptocurrency regulation.
A regulatory roadblock
The Winklevoss twins’ worldwide operations extend to around 70 countries, with the United States being their largest market.
Despite this, they foresee a switch in market dominance as they believe the Asia-Pacific (APAC) and Middle East and North Africa (MENA) regions will surpass the U.S. due to its stifling regulatory environment.
Gemini, like other cryptocurrency firms, is wrestling with the ambiguity of regulatory affairs in the U.S. Operating a cryptocurrency exchange requires a combination of trust company licenses and Money Transmitter Licenses (MTLs), depending on the state.
This complex regulatory web, according to the Winklevoss brothers, hinders innovation and business growth.
Another significant bone of contention for the brothers is the SEC’s failure to provide clarity on the classification of Ether. They express frustration that the SEC is yet to clearly classify whether Ether, or indeed any other cryptocurrency apart from Bitcoin, is a commodity or a security.
This ambiguity is a significant issue for the crypto industry. Commodities typically receive less stringent regulation compared to securities, which is why cryptocurrency firms often argue that their tokens are commodities.
The only guideline so far from U.S. regulators is that Bitcoin is a commodity, leaving all other cryptocurrencies in regulatory limbo.
The case of Ripple Labs, sued by the SEC on the grounds that its token is a security, demonstrates this uncertainty. The outcome of this case, yet to be determined, may establish a precedent for the classification of other cryptocurrencies.
The twins argue that even if a token begins as a security, it can become a commodity over time as it becomes more decentralized. If Ripple’s token is deemed a commodity, they contend, then Ethereum, with its more extensive decentralization, should certainly be classified likewise.
Winklevoss twins on regulation by enforcement
The Winklevoss twins assert that the current state of affairs is essentially “regulation by enforcement,” akin to a policeman arbitrarily shooting at people who cross an unmarked line.
The absence of clear rules and the haphazard enforcement by the SEC is like trying to fit “square pegs into round holes.”
Moreover, the twins feel that the SEC has contradicted itself, citing past statements from Gary Gensler, the current chairman, stating that most cryptocurrencies are not securities.
They accuse Gensler of enforcing non-existent rule books and damaging the crypto industry by causing confusion and uncertainty.
As the conversation with Srinivasan continued, they lamented the current state of affairs, arguing that it stifles innovation and pushes businesses towards more crypto-friendly regulatory environments such as Singapore, Dubai, and Hong Kong.
They predict the next growth phase for crypto will come from MENA and APAC regions, bolstered by friendlier regulations.
Despite their frustration with the SEC, the Winklevoss twins remain hopeful for the future of crypto. They argue that the digital, global nature of the technology means it will inevitably prevail, leading to a more equal and free financial world.
Still, they warn that this victory will not come without a fight against the outdated regulations that hinder crypto’s progress.
You can watch the interview here.