Thread by @RaoulGMI

Listening to Gensler and it's clear he is laying down the hardest case he can for regulation of digital assets. But my view is that he will likely get his way that most are going to be classified as securities but with a wholesale change to what that means 1/

It's like then the internet started to gain real traction, the authorities tired to impose harsh rules but in the end, there had to be a grand compromise to not stifle something very important indeed.

That decision led to trillions of dollars of new capital creation and the largest investment inflows into the US in history. The innovation that was seeded from light touch regulation of the internet changed the world, with the US as leader.

Digital assets are as big a deal... this technology has created an entirely new financial system, more robust than the last, and created entirely new business models on a scale we are all trying to get our heads around as its developing so damned fast.

Digital Assets might well be "securities" but the regulation around that will end up being much lighter touch than today. If they try the heavy hand, capital leaves and also the lobbying power of the crypto community is growing every day. Money talks.

The reason no one wants to call something a security is that it comes with a HUGE burden in cost, time and access to regular investors. But, pair that all back to create "innovators regulation" and layer in KYC, tax compliance and some investor protections and it's a good thing.

And that also means the frankly ridiculous rules around Accredited Investors or selling securities HAS to change to meet the modern world, not the 1930's world. It is simply inexcusable to allow rich people to get richer and penalising the poorer people who aren't accredited.

In a world of decades stagnant real wages and rising asset prices that is morally wrong. That very dynamic has pushed US households to rack up more debts than in all history. What is more risky, the debt or the digital assets. We know the debt is what makes the banks rich too...

The political push back from stopping ordinary people access to investments just won't work in the current political climate, and nor should it. Newer crowd funding rules have shown the way and the legal changes around some of that has helped but...

The current system still generally forces individuals to use large financial institutions to get access to investments, keeping the power in these institutions hands. This is unlikely to survive as a structure as its inherently unfair and trust in institutions is entirely eroded.

The madness of all of this is that people are free to bet on sports or throw all their money away in Vegas but can't buy securities. They can lose money in any number of unregulated private transactions.

My view is that in the end, we will get new securities laws for digit assets and that they will be cheaper, faster, fairer and much less onerous on issuers. Consumer protection will have to come via warnings or some sort of risk metrics.

But this will take years. The next 3 to 5 years in crypto will be about setting the battle lines and then using the courts and lobbyists to reach a grand settlement of what it means to classify something as a security. In the end, that will help the space and

as with all regulations, there will be regulation arbitrage in different jurisdictions if required.

But regulation IS coming globally and countries that actively encourage these entrepreneurs with lighter regulation will take the lion share of the benefits.

I don't see the US making the same mistakes the EU did with internet companies that essentially forced all innovators abroad. It is not in the US DNA.

Gensler's hard line is the start of a long negotiation. Classic negotiating tactics - start ultra tough then compromise.

The DA industry needs to formally come together and do the same, just as the internet companies did. It's going to cost a lot of money but in the end, where the compromise is made is the difference between a $10trn industry or a $200trn industry.

That is a hell of a prize.