Should cryptocurrencies be regulated like securities? Financial regulators have been pondering this question for some time. In a Briefing Paper published today by the Cato Institute’s Center for Monetary and Financial Alternatives, I suggest that securities regulation would only seem warranted in certain clearly circumscribed cases. For the most part, cryptocurrencies should be treated like commodities.
It has been nearly a decade since “Satoshi Nakamoto” laid the intellectual foundations for Bitcoin, the first cryptocurrency platform. Since then, more than 1,600 peer-to-peer networks have emerged to disrupt established intermediaries. Cryptocurrencies, even in the comparably bearish first half of 2018, have an aggregate market capitalization of nearly $300 billion.
While policymakers’ attention has gradually turned to designing an appropriate regulatory framework for this emerging technology, policy uncertainty persists. On one hand, some policymakers recognize the potential for cryptocurrencies to increase competition, reduce transaction costs and improve capital formation opportunities for firms. On the other, statements from regulators at the SEC and CFTC, the two agencies most closely monitoring the development of cryptocurrencies, have been unclear, equivocal, and sometimes outright contradictory.