Regulation
“You’re screwed” because you’re “safety”
Ethereum (ETH), co-founder Vitalik Buterin expressed his dissatisfaction with the way the United States handles cryptocurrency regulation.
In a recent interaction On Warpcast, Buterin said he believes the current regulatory system fosters the creation of projects that offer vague promises of returns without any real substance.
Buterin further argued that if crypto yields and rights are classified as securities, the focus should be on developing tokens that maintain or increase economic value.
Additionally, the Ethereum co-founder stressed that this change requires sincere collaboration from regulators and the crypto industry.
It all started on June 28, when an Ethereum Foundation member named Jason posted on Warpcast, reflecting on a tweet Buterin posted in 2022 during the debate over Sam Bankman-Fried’s proposed front-end regulation.
Source: Jason on Warpcast
In the tweet, Buterin He suggested several regulations on the interfaces of decentralized finance (defi) platforms that could help reduce the number of opportunists in the industry and improve security.
They included limits on leverage, transparency on audits or other security checks on contract code, and limited use by knowledge-based testing rather than minimum net worth rules.
Sharing the post, Jason said he still believes in the value of these regulations proposed by Buterin and invited the Ethereum co-founder to share his current thoughts on the matter.
Jason also proposed the idea of a pop-up that displays the current tokenomics distribution of a coin before a trade, with links to Etherscan showing how major holders acquired their coins.
In response to Jason on June 29, Buterin highlighted the central problem of crypto regulation, particularly in the United States.
He pointed out that projects offering vague promises can operate freely, but those that provide clear information about returns and rights are often classified as securities and are subject to stricter regulations. He called it “anarcho-tyranny” detrimental to the crypto space.
The main challenge of regulating cryptocurrencies (especially in the US) has always been this phenomenon where if you do something useless, or something where you ask people to give you money in exchange vague references to potential returns at best, you’re free and quiet, but if you’re trying to give your clients a clear story of where the returns are coming from and promises about what rights they have, then you’re screwed because you are “a security”.
Vitalik Buterin, co-founder of Ethereum
Buterin also wants a regulatory an environment in which issuing a token without a clear long-term value proposition is riskier.
In his view, providing transparent long-term outlook and adhering to best practices should ensure the security of crypto tokens. To achieve this, he stressed, would require real commitment from regulators and the industry.
Buterin’s comments follow a US judge’s June 28 decision to dismiss the U.S. Securities and Exchange Commission’s (SEC) claim that Binance’s secondary sales BNB the tokens are referred to as securities.
This decision was influenced by the SEC vs. Ripple, where the economic reality of transactions was highlighted when applying the Howey test.
The judge ruled that secondary sales of Binance Coin are not considered securities, a major victory for crypto traders.