Bitcoiners wonder if BTC is regulated differently than other cryptocurrencies. Aaron Koenig, editor of Hyperbitcoinizer asks, does it need to be regulated at all?
There has been a lot of discussion lately about how Bitcoin and other cryptocoins should be regulated. Some people like Michael Saylor, CEO of Microstrategy, argue that only bitcoin should be considered a commodity, while all other cryptocoins should be considered securities. “Blocktrainer” Roman Reher and other German crypto influencers even wrote an open letter to EU regulators demanding they accept this view.
This would make a significant difference. In the United States, securities are regulated by the Securities and Exchange Commission (SEC). Their criteria for issuing licenses are much stricter than those of the Commodity Futures Trading Commission (CFTC). The regulatory practice is similar in other countries. If the claims made by Saylor, Reher, and others are picked up, many crypto companies would face serious problems.
What are commodities and stocks?
In the traditional world, the distinction between commodities and stocks is relatively clear. Commodities are assets such as oil, gold or other precious metals. They are not man-made, but raw materials that can be found in nature. Agricultural products such as wheat or rice are also considered commodities, although they may have been bred or genetically modified.
Securities are assets such as stocks, bonds or derivatives issued by companies or government institutions. They usually pay interest or offer some other form of monetary compensation to their holders. The definitions of these asset classes vary between different jurisdictions and are not always very precise.
It is not easy to fit Bitcoin and other cryptocoins into these traditional categories. Michael Saylor argues that Bitcoin, due to its decentralized nature, cannot be modified and should therefore be seen as a commodity. He believes Ethereum and all other cryptocoins and tokens are controlled by small groups of people. They are therefore securities that should be tightly regulated by authorities such as the SEC.
Bitcoiners: A Risky Ride
This position is clearly one of maximalism. Some people think there should only be one cryptocurrency on the market: Bitcoin. For them, all other cryptocoins are “shitcoins” that should be banned by the government. This is an oddly statist stance that clearly contradicts Bitcoin’s libertarian roots. Shouldn’t the market decide rather than a central instance?
Let’s not forget that Bitcoin has also undergone some serious changes, such as the introduction of SegWit or the recent Taproot upgrade. Maximalists are treading on thin ice if they want to see Bitcoin’s “immutability” as the main criterion to avoid being classified as a security. It could seriously backfire to side with government institutions to gain an advantage over other cryptocoins.
Undoubtedly, many of the coins and tokens issued over the years had the sole purpose of making their founders rich. Among those that are not clearly identifiable as scam products, many will fail to live up to expectations. Bitcoin’s first mover advantage is very difficult to catch up.
Bitcoiners and altcoiners need healthy competition
However, competition is a good thing. It would be foolish not to use it even if you are a die-hard bitcoiner. Rootstock, the sidechain that enables smart contracts based on Bitcoin, has learned a lot from Ethereum, even using the same account format and virtual machine. The methods developed for privacy coins such as Monero or Z-Cash could also bring more privacy to Bitcoin.
It is inappropriate to bash all other coins and even work with government institutions to ban them. Bitcoin maximalists should rather embrace the competition and remain confident that it will only make Bitcoin stronger. It’s not very likely that a coin will emerge that outperforms Bitcoin by a few orders of magnitude, but when it does, it’s worth acknowledging.
These stupid battles between bitcoin maximalists and altcoiners are better avoided. Our real enemies are governments and their monopoly money.
Of course, we need to identify obvious scam coins and warn people not to invest in them. But when it comes to government regulation, bitcoiners and altcoiners should put their differences aside and stick together.
I firmly believe that neither bitcoin nor altcoins are regulated by government institutions and should conform to their outdated rules. “Commodities” or “securities” are terms that do not fit into the world of decentralized digital assets. An international self-regulatory body formed by crypto industry players might be a better way to identify and stop bad players to protect investors.
About the author
Aaron King is the publisher of Hyperbitcoinizer.com, a blog focused on the economic and political aspects of Bitcoin. Aaron has been an entrepreneur, author, and speaker in the Bitcoin space since 2011.
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