Illustration: Rae Cook/Axios
Fittingly for a day in which Securities and Exchange Commission chair Gary Gensler pulled no punches in his congressional testimony, the main theme running through the Blockworks crypto conference on Tuesday was undoubtedly regulation.
Why it matters: The crypto world both hates and needs regulation in equal measure.
State of play: Few if any U.S. crypto companies can say that they are regulated by the SEC or any other national regulator, and have passed that agency's scrutiny.
- The SEC complains that crypto companies like Coinbase don't come to it for regulation. That's even though those companies deal every day in tokens that can be considered securities, even though Coinbase is an actual exchange — and even though a thumbs-up from the SEC would confer a degree of legitimacy that would be extremely reassuring to investors both small and large.
- The crypto companies complain that they can't stand still waiting for regulatory approval on the basis of decades-old securities laws, while the rest of the world leaps ahead with innovations like distributed exchanges that don't even have a corporate entity to regulate, or even a nationality that could determine which country's regulator to approach.
The big picture: Existing players in the crypto space have experienced extreme volatility in the price of crypto assets, and concomitant huge speculative gains and losses. They've also seen a large amount of fraud, theft and other crime. Today's crypto investors don't think of it as a safe place to park funds and don't feel that they need any kind of regulatory hand-holding.
- A safe and trusted financial system, however, is the destination that many crypto companies claim to be aspiring to, especially with the rapid growth of stablecoins linked to the dollar.
- Of note: The SEC's most recent action, targeting Coinbase, came in response to an attempt by Coinbase to create a beacon of safety in the crypto world — a guaranteed savings account denominated in dollars.
The bottom line: The bigger the money, the more the demand from conservative investors for clear rules and regulations. “The DeFi guys want the TradFi money, but they don’t want the rules," Ledger's Joel Edgerton said at the Blockworks conference. "It doesn’t work like that.”