Venture capital firm a16z (Andreessen Horowitz) recently pointed out in a blog post that the current regulatory policies of various countries tend to resist or even suppress cryptocurrencies, which may lead to a misplaced focus and benefit high-risk tokens like memecoins, while putting genuine innovative projects under regulatory pressure.
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Is Regulatory Enforcement the Root of Cryptocurrency Crimes?
The Cryptocurrency Market Has Tilted Towards Speculation
a16z Criticizes the SEC for Failing in Any Responsibility
Unclear Cryptocurrency Regulations
Improper Cryptocurrency Enforcement
Dixon Provides Regulatory Suggestions
Chris Dixon, a general partner at a16z who previously published the book “Read Write Own” discussing the long-term significance and development challenges of the Web3 industry, also expressed in the article that the current regulatory policies, primarily in the United States, are stifling the entire cryptocurrency industry and may even contradict the ideals of regulatory agencies.
(a16z Partner’s New Book “Read Write Own”: Blockchain Compensates for Early Open Source Project Disadvantages, but Needs to Overcome Speculative Culture)
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Dixon points out the important issue in the blockchain and cryptocurrency field at the beginning of the article: why does the market always repeat these cycles and patterns instead of supporting truly transformative and productive blockchain innovation products? He states that the cryptocurrency market, which has always been dominated by speculation, is filled with utility tokens based on various projects as well as memecoins that have little practical use. The latter, as an important role in the cryptocurrency industry, often plays a leading role in some malicious incidents.
(Vitalik on the Chaos of Memecoins: Respecting Memecoin Hype and Hoping to Witness Higher-Quality Projects)
However, Dixon attributes the root cause of this phenomenon to the regulatory agencies themselves. The current unclear regulatory policies and improper enforcement methods have made speculative tokens like memecoins popular, while practical and productive blockchain utility tokens have to constantly worry about regulatory crackdowns. He adds, “In fact, it is safer and easier to launch a memecoin without any real use case today than to design a project token with a genuine purpose.”
Firstly, in line with the content of the previous book about the conflict between computer culture and speculative markets, Dixon believes that the widespread “computer” and “casino” culture in the current cryptocurrency market is gradually leaning towards a crisis of speculative tokens, which can be attributed to regulatory agencies. However, he also believes that as time goes on and the market matures, the speculative culture will decline, and memecoins may start exploring the combination with practical use cases.
Dixon specifically mentions the U.S. Securities and Exchange Commission (SEC), emphasizing that the SEC, which was originally supposed to encourage industry innovation through legal frameworks while protecting investors, maintaining fair order, and promoting capital formation, has failed to achieve any of these goals in the face of the cryptocurrency field. Dixon states that the vague state of current regulatory policies leads to fear among cryptocurrency platforms and entrepreneurs that their tokens will be considered securities.
Even though Bitcoin and Ethereum are not subject to significant regulation or sanctions under the SEC’s “Howey Test” due to their lack of managing entities, other projects may not be as fortunate. Dixon is concerned that innovative projects are hindered while memecoins run rampant due to the SEC’s lack of a clear and straightforward approach and its tendency to take enforcement actions, leading to many doubts and uncertainties in the industry.
Dixon further emphasizes that although the Howey Test is a reasonable evaluation basis, it is still subjective, and the SEC has improperly expanded its meaning, causing teams focused on developing solutions to be in panic. He states, “The SEC has expanded the meaning of the Howey Test so widely that ordinary assets, even shoes like Nike’s, could be considered securities today.”
At the same time, memecoin projects that do not have developers or management teams may not meet the securities determination criteria of the Howey Test. Dixon is worried that this phenomenon will make memecoins more prevalent while making it even more difficult for innovative projects to succeed. Investors will face more risks instead of reducing them.
(“Come to America Often!” SEC Claims Authority to Regulate Tron Founder Justin Sun)
Dixon acknowledges that stronger regulation is indeed needed to address the frequent occurrence of criminal incidents in the cryptocurrency field and proposes better specific regulatory solutions, including individual risk disclosures for different projects or longer token lock-up periods to prevent intentions of quick wealth accumulation and incentivize longer-term development.
a16z
Andreessen Horowitz (a16z)
Chris Dixon
Memecoins
SEC
Cryptocurrency regulation
Enforcement
Memecoins