The Securities and Exchanges Commission (SEC) has a three parts mandate: to protect investors; to maintain fair, orderly, and efficient markets and to facilitate capital formation.
Such mandate it was given during the height of the depression nearly a century ago following a stock market crash and a banking collapse.
In that atmosphere of panic, lawmakers were looking to tame the market, aided perhaps by the rise of marxism which blamed free markets for all ills.
Missing from SEC’s mandate, thus, stands competition. Now a century later that error is evident. We’ve all seen Facebook’s stock fall recently, but a big reason why there is one Facebook, rather than many, is SEC.
Apple has just surpassed a trillion dollars in market cap. It is something which should be celebrated in many ways, but has it really passed that landmark on merit?
Amazon recently was found to have paid just 6% in taxes in UK. Its CEO boasts he is so rich, he doesn’t know what to do with all that money. Paying his fair share in taxes is apparently not one of them.
Why is such bookseller facing little competition? You have to go to China, online, to Alibaba’s website, to see effectively an Amazon clone. Even Europe doesn’t have one.
Is it a work of genius, this business model that can easily be copied, or has something gone wrong with regulations to the point we now have a monopoly economy, a command economy, and a new aristocracy?
Google. Their secret sauce has been known for now two decades. Yet it appears no one can compete with them. Monkeys, apparently, no longer see, monkey do.
Instead we have suggestions now the government should be involved in having “oversight” over Google’s algorithm. Control, in other words, over all human knowledge. What’s shown, what not, what’s on the frontpage, what in the millionth page.
Yet why has there been no new search engine for so long? Why is there no real competition in many areas? Has the free market theory failed or have regulations chained our economy?
We suspect the latter and for very good reasons. In our daily reporting we see how regulations impose restrictions on competition and how regulators respond by in effect ignoring all concerns.
The latest example is SEC’s decision on the bitcoin ETF. It can be summarized as SEC saying that for an ETF to be approved, already established giants such as CME, CBOE, or now perhaps Bakkt, must account for the majority of bitcoin trading. SEC says:
“The commodity-trust ETFs previously approved by the Commission have had—in lieu of regulated spot markets of significant size—a regulated futures market of significant size associated with the underlying commodity, and the listing exchange had entered into a surveillance-sharing agreement with that futures market.”
Clearly the commission is suggesting bitcoin does not have a regulated spot market. From their perspective, Coinbase is not actually regulated.
Coinbase does comply with laws of 52 US states, has a BitLicense from New York City which imposes very stringent requirements, has recently even acquired a securities license. It co-operates with and even trains numerous enforcement agencies. Its reputation, where regulation is concerned, is spotless.
Yet as far as SEC is concerned, it is unregulated because neither CFTC nor SEC has oversight over Coinbase.
SEC further says a lot of bitcoin trading occurs in oversees unregulated markets. South Korea accounts for much of bitcoin trading volumes. Recently they’ve imposed strict regulations on crypto exchanges. As has Japan. Bitstamp is regulated.
Of course not according to SEC. CME, CBOE is regulated. The rest can drown in red-tape and remain unregulated.
What this means, thus, is that most of the bitcoin trading volume has to occur on the current wall street giants. New entrants can comply with whatever they wish. SEC has closed the door.
While it closes one door, it opens widely another. NYSE’s parent company, clearly seeing the opportunity, launched yesterday to much fanfare basically a Coinbase copy-cat, but with a twist.
The buying and trading of bitcoin on Bakkt is called a futures. It isn’t. A one-day futures is ludicrous. It is spot trading, but spot-trading is unregulated, so you put a futures on there, ask CFTC for a rubber stamp, and now you can take all the business that SEC has just given to you.
As smart and repulsive this daylight sophisticated corruption is, it pales in comparison to SEC’s closing the door to capital formation, which is their mandate.
Tokens, according to SEC, are little more than stocks with a new name. Of course, where it comes to the one day futures, that argument won’t be made.
Innovative start-ups in a brand new field need millions to comply with SEC “regulations” to raise money from savers. The same start-ups need nothing at all to raise money from established giants, like banks or billionaire Venture Capitalists.
Those billionaire VCs like monopolies. They won’t fund your Google. They’ll laugh you out of the door. Competing with Facebook? Preposterous! You want to take on Amazon, Lenny? Poems everybody!
Poverty in high streets more than poems, unfortunately. Then some of the middle-class turn against the poor who are taking “handouts” paid by the middle-class’ taxes. A strategy that keeps working even as corruption is shown in broad daylight.
This is just what we see in our own industry. What other corrupt “laws” are there floating around? “Laws” that appear unchangeable even as their breach of all principles stands clear.
Laws that are not laws at all, but handouts to the rich and corporations who need pay no taxes and can do what they please with peanut fines the most they can expect by the paid for and bought “regulators” who are often made rich by previously working for whoever they “regulate.”
Like SEC chairman Jay Clayton, who made millions from advising bankers how to bypass “laws” that are not laws.
For this privilege, some vital drugs that can save lives cost a leg and arm. And when entrepreneurs can do it more cheaply, the aristocrats’ police, who call themselves regulators, does all it can to get rid of the disruptors.
All of course to protect the public, yet what public voted for the Securities Act? What public voted for high costs, for monopolies, for unaccountable regulators who do not even hold public consultations?
The lobbyists are not the public. The public is instead asking: where is the democracy here? More than that, where is the free market?