How SEC lawsuits against Binance and Coinbase shape crypto regulation

Transcript

GM GM welcome to web3 Academy your one trusted source to capitalize on the next big phase of the internet I'm Cloud redhead and I believe that web3 is going to change the world and that's why we're covering a path for doers to confidently build and invest in web3 in today's episode I'm joined with Raul and we are talking on a Twitter space with a topic called are we all screwed regulation in crypto Market updates a lot has been happening over the last week in terms of the regulatory environment mainly in the U.S but also some stories coming out of other countries as well and the market took a beating on Friday night Saturday morning as a result of this and so we've

had a lot of questions and we wanted to get on and just explain what the heck is going on here in this space right now and what you should be doing or thinking about during these times there is some craziness going on in the U.S and then other countries taking advantage of that which is great for the overall crypto market and so again we're going to dive into the details around this so that you're up to date and understand what to do in terms of investing but also in terms of if you're building into this space so we'll cover that as well as much more in today's episode so friends thanks so much for joining and if you haven't already make sure to subscribe to our Channel whether you're on Spotify Apple music YouTube make sure to subscribe give us a like and definitely

comment as well and let us know what you think of the regulatory environment again you can just comment below and let us know your thoughts here feel free to add to what we are discussing and talking about thanks so much for joining this episode and before we get into this one we'll just take a quick second to hear from our sponsors the future of social media is here and that future lives in web 3 on top of lens protocol web 2 social platforms are broken and right for disruption you see the epicenter of social media is the creators and yet they are the most neglected web 2 platforms like Facebook Tick Tock and Instagram are all essentially robbing creators of their or Worse craters are a new type of entrepreneur forming new types of businesses yet with web 2 platforms creators don't own their content to the

profiles and that's their product and business instead they are tied to the platforms they choose to create on well just like how crypto is freeing us from Banks web3 is freeing us from these centralized platforms on lens protocol creators own their content own their profile and even their social graphing followers in the form of nfts this allows you to move freely from one social application to another with your content profile and followers moving along with you lens protocol enables self-saverty for your social graph and interoperability across the internet at web Theory Academy we believe this is the future of Social and that's why we partner with lens to ensure that the path of social media is heading in the right direction visit lens.xyz to learn more today

what's up y'all doers we're seeing signs on chain of the very early stages of a crypto Bull Run there's a big wave coming and we want to make sure you're on it Now's the Time to capitalize on the opportunity how you ask by starting to practice consistent dollar cost average buys into strong network-based assets like ethereum and Bitcoin however when buying please make sure to use a trusted exchange our newest sponsor by D5 is a reliable exchange that offers you a platform to turn your Fiat into crypto they also offer awesome rewards allowing you to earn up to twenty eight hundred dollars for completing easy tasks like setting up two-factor authentication and verifying your

identity if you're eager to get into the market get started with by defy Now by visiting bydify.com that's bydfi.com or clicking the link in the description below okay so we had a lot of news over the weekend with regulation coming from the US and Market dropped and it crashed every one was freaking out basically what happened was on Monday last week the whole Mayhem started with minus getting charged with 13 charges by the SEC we talked about this last week on the podcast but just a reminder for everyone then on Tuesday coinbase was sued by the SEC because they were listing Securities and over the weekend crypto.com shut down its

institutional service basically just a platform which is similar to their retail platform but for institutions who need to kyc in a different way if you are a result investor they said that it was due to low demand from institutions investing in crypto nowadays because of everything that's going on but I have a feeling that it's just to stay compliant with the SEC and you know its laws and whatever their laws are very unclear but I think everyone is just scared to get a suit so they just want to comply with whatever they think it's the law so that's why they shut down I think then we had Robin Hood late Friday announcing that they're going to the list cardano Matic and Solana from their platform so basically the way Robinhood works you

can buy stocks and crypto there like it's a custodial wallet just like buying us in coinbase and they will delist these three tokens so cardanomatic and Solana at the end of this month and if you don't sell your tokens if you're still going to hold tokens in your wallet they will basically sell those tokens for you when the time comes so yeah a bit a bit scary a bit sketchy but that's what's gonna happen the reason again is because the SEC listed this talk is the Securities and you know this whole war against crypto lets you about 300 million liquidations there were a lot of people posting on Twitter how they lost their net worth because they got liquidated a lot of Futures got drawn back and because of all of this prices of most all coins went down

between 20 and 30 percent on Saturday morning they kind of stabilized there uh over the weekend but it's not looking great so what we're going to talk about is you know just make the situation a bit clearer I guess so car wasn't actually start us off what do you make of this whole situation what do I make an old situation it's a bit of a show I think for the industry just to see has you know added up in this industry for a long time and it's unfortunate I mean the fact that they gave approval to coinbase to IPO with their existing business model with all these existing tokens already on their platform to now come and see them is in a while I don't know about the situation with binance other than the security

stuff but the rest of it like don't really know and so it's black also who knows so maybe they have a reason for that but in terms of the Securities laws and that I think they should just be you know regulating and telling us what is the security and what is not and instead they're going to lawsuits for that which sucks for many reasons one it's I mean it creates a lot of fear uncertainty and doubt so we have all these platforms that may or may not be delisting something that is maybe a security may not be security right but they're de-listing them anyway like we don't know if Solana and cardano those are securities yet Robin Hood is de-listing them which is crazy like they should just come out and say yes this is or we believe this is instead it's like hey we're gonna go to court which is going

to take years and then we'll decide right so like it's a shitty way to do this but that's exactly what I think Gary ensler has been wanting to do for whatever his motives are I don't know I can see that you can tell that his goal is to just delay things as much as possible so it's unfortunate but I think where this goes is I mean we also had over the weekend a representative in Hong Kong say hey coinbase you're welcome to come here we also had a16z crypto which is a tech slash you know head or investing firm I'm one of the biggest in crypto but also in other markets as well they are now opening an office in the UK and the prime minister of the UK has said hey we welcome crypto we're going to create and already have

created a really good regulation so companies are welcome to come and build there and exchanges are welcome to come and transact there and do what they do so we call this regulatory Arbitrage right the US is not giving good regulation if any regulation at all and so this is a great opportunity for other countries other Financial hubs around the world like the UK like Dubai like Singapore like Hong Kong and this has happened many times in the past so the euro dollar one of the biggest markets in the world that has came from Europe in the UK because the US wouldn't allow it FX trading is something that happens overseas because the US wouldn't allow it derivatives happens in UK again because there was just not good regulation in the U.S these happen many many decades ago but that was a

regulatory Arbitrage for for the UK and now they host some of the largest markets in the world as a result of the U.S basically moving that elsewhere and so same thing here right this is the next phase of the financial markets and just like derivatives was and FX markets Etc and so it looks like anyway so far that the us is going to miss out on that one too but it's fine I mean short term this sucks right now you know I mean those who are on these exchanges that want to on this stuff and now can't it's quite frustrating I mean coinbase doesn't de-list anything so you can still use it obviously Robin Hood has but I think long term nothing really changes here U.S investors will still be able to invest in this stuff and same with for example institutions that want to use this they're just going to open

up offices in the UK in Singapore in other jurisdictions and they'll continue to do their crypto trading and their crypto Investments there that's how it works all the biggest companies in the US that want to use derivatives and FX and all these other things they still exist they just open up offices in London and then they go and they do that and so the capital still flows there they just can't run it out of their head office in New York instead they have to do it in London so it doesn't really matter long term so I actually don't think this is as big of a deal as some people are saying on Twitter but that's my quick summary I don't know Raul if you have any additional questions on that yeah I think this all sounds like a small hurdle in terms of like the

long-term plan for crypto and you know the Innovation probably it looks like the US will miss out on a lot of this because other countries like the UK and Hong Kong are jumping on this to capitalize on getting these companies in their countries which is going to be interesting to see like if these companies are actually going to make a move like to completely detach themselves from the US it would be really really interesting to see and that would be a major shift I think we have some time today to talk about this but can we just go back and talk about like what a security is can you just explain that in like five minutes yeah absolutely so there's a lot of confusion in this so security is kind of an open-ended there's an open-ended definition to what it is so there isn't a specific definition but the best they

do is back in the 30s I believe it was they create it was called the Howie test which is basically a security is something that is an Enterprise that takes investment from other people that expect profit and the the work or like the output of that Enterprise comes from the work of other people so there's sort of four components right it has to be a company okay there has to be an Enterprise there has to be some sort of investment in the beginning other people have to be working at this company to like grow it and there has to be a expectation of profit and so it has to fit all four of those for it to be deemed to security right so you think of like a commodity which is the other end of the spectrum these are also things that you can expect to profit from some

people work in them but they just don't have a commodity itself is not a company right like wheat for example is not a company right so there's different ends of that Spectrum same with like art or trading cards these are all things we sell for profit right and that you might invest in to put this in a company around them right so there's no Enterprise structure or there's no people actually working to make that thing you know have value there's always these different components too it needs to be all four and that's where things get very difficult with crypto to be fair there are a lot of Securities in crypto absolutely there are a lot of the icos from 2017 2018 those were Securities it was exactly a company raising a token for Capital that they were going to pay to hire developers and a team with the expectation of making

money so there are a lot of crypto Securities and that's fine and those shouldn't be regulated those shouldn't fall under security the Securities act they should go and do their paperwork people think because it's crypto everything just has to be against regulation like that's not how it works so those companies that just instead of doing it the normal way where you got to get lawyers and all the stuff to get equity and to raise Capital those in the crypto World should follow these security laws 100 we're not disputing that it's the fact that you have things like ethereum and Bitcoin and even Salon today which they maybe there's Enterprise around the protocol itself but like Solana is not an Enterprise Solana Foundation is the company and so it's not an Enterprise self Solana it is

a token that people did invest in to make future money but it's a lot of adult doesn't have a company it's not a foundation so like the other idea of this is like maybe Seoul was a security at some point but once it gets decentralized enough to it's no longer a company it may have moved from a security Now over to commodity so it doesn't really fit that idea so there's this sort of spectrum it's a weird situation in the U.S and so that's what we're gonna have to figure out here in uh in court I guess is where it's going to all play out we actually have the Ripple case with xrp same sort of idea that's been going through court for a while now and that'll get resolved I think it's actually really soon could be this week in the next couple weeks so

that'll be very interesting the weird thing about crypto is some of them are securities we can raise Capital but then they also can be programmed to do many other things and so it's just a technology in the use case we've never really used before and that's never really existed so we don't really know where it falls in the category of Securities yet but most of them are not for sure at least not the ones they're talking about in terms of like cardano Solana eth like these are definitely not Securities it just doesn't make sense so we just need the court to decide on that I think coinbase is pretty confident that they will the last note I would say as I was watching an interview with um Brian Armstrong with the Wall Street Journal he was over the weekend they were just talking about you know why

they don't have more clarity and has Brian Armstrong the CEO and founder of coinbase spoken with Gary Gensler I'm the head of the SEC and he said that he won't meet with them they've been trying for years and they're against absolutely will not meet with them which is crazy because the SEC has approved coinbase to go public so usually they would meet with him and Brian's like I meet with every regulatory body all over the world the only one I can't is Gary Gensler he's the only head of regulatory that he cannot get a meeting with which is just very odd for a public company with you know obviously that's going to court in that too it's a very weird situation but um we'll see where things play out but I mean in other countries this is an issue the big issue of why the Supreme in the

U.S is there's two regulatory bodies there's a cftc which governs the Commodities and then there's the SEC which governs securities every other country in the world just has one regulatory body that governs both of them and so the weird thing about the US is there's like this Turf War of the cfdc and the SEC where SEC saying everything's a security cftc saying everything's a commodity and they're like battling it's just childish to be completely honest not only don't have any structure they also like apply laws to new technologies that have been written so many years ago like almost 100 years ago which it just doesn't make any sense because it's something new we can't regulate something new with ancient laws which is what coinbase has

been advocating for to get you know more collaterally and to have these laws made for these new technologies but I agree with you like a lot of icos from from back in the day are they sound like a security but most of the crypto industry isn't and that's what Gary Gessler was preaching in his uh when he taught at Harvard he had this interview where he said that 70 of the crypto Market wasn't a security and now he's going against that just two years later and he's going against his word I just add to that it's okay if there are cooking tokens that are securities that's fine and it makes sense because it's a much more efficient way to raise Capital it is better to create a security on a blockchain than it is to do it in the old way in the traditional Finance way so like we will

have many Securities on blockchains absolutely it's way cheaper for any company in the world to have to register security via blockchain than it is to do it in the traditional way to do it so like that's fine it just means that if your security of course you need to go and you need to fill some paperwork and you need to give reports and blah blah blah that's completely normal because you're a company that's in the US and so that's fine but there's just other things that are not necessarily Securities like nfts right like a trading cards are not Securities they should not have to write reports and get files of the SEC that makes no sense it's the same with nfts depending on how you use them would not need that either same as something like Bitcoin which is more like a currency well that's not a

security it's a currency right and those who create currencies don't need to go to the SEC they govern security so again there's going to be many different types of tokens and we just need to not box them all in one I think is what a lot of people are not really wrapping their heads around yeah you wrapped it up well there to you know get a sense of like what's happening and how the SC is fighting this but what I want to touch on is like what's next for the industry and like for our listeners who are like wondering what to do next what you know Investments to make to stay safe and compliant and stuff like that what's next to the industry what should everyone do from now on so I would say first of all don't get scared of these things a lot of them are just flood I

know a lot of altcoins if you want to call them that but these other you know lower market cap tokens have gotten wrecked you know 20 25 in the container in a couple hours really over the weekend as a result of this which sucks but also you shouldn't be putting a lot of money in these things anyway they're so new we don't know yet what they are like you said a bunch of people lost their life savings and we're tweeting that like that's their own fault that you should never be putting a bunch of money in these like smaller tokens it makes no sense Bitcoin these are your safe havens that basically represent the entire industry and we know that they are going to be fine and so like if you're trying to invest just put your money in these safe assets they go up

150 per year on average you don't need to try and hit these like 100 X's there's a good chance you're not going to get it and so keep it safe and just go to these assets that you know are gonna go up 100 prettier on average it's better than Warren Buffett better than every other investor personal investor in the world and you can do that so easily and these things don't really impact it I mean like when all this came out everything went down 25 each was down like five percent in Bitcoin down like three and a half percent right and they're already almost back up to where they were so like it's not that difficult and ethereum is a global smart contract platform that's used by the world I mean was it the Norwegian government that just launched a sable coin on top of it over the weekend as

well on our beach room yes on arbitrary right so like guys adoption's happening it's happening all around the world us is a big market and we need that of course but there's going to be some pain there and that shit's got to get figured out they need to get regulation but the rest of the world is going to move forward with this and so for now anyway especially as we're in a bear Market although I think we're in the early stages of a bull market but that's going to be led by Bitcoin and eat and until those things start to Skyrocket you should not be putting a bunch of money in these smaller I hate the term altcoin but other tokens for the meantime because it's just it's so risky and it just doesn't make a lot of sense right now but you have some for sure bets in

Bitcoin and Eve so it's like it just doesn't make sense to not be in that and other than that like just continue to stay educated on this stuff and build your conviction because look this stuff's gonna happen we're going to have these ups and downs we're always going to have these scares with the us we've had them with China previously with India before but they're short-term right because again one you know government's loss is another's opportunity and that's why we see China who's getting more bullish on crypto right now even though they they were the ones Banning it a couple years ago right and you see the UK going basically all in on this stuff so the space is happening with or within the US and I think the thing people are going to say is the us is going to be in this space

they're not going to leave it they're just going to take a bit and they're probably going to up for a couple years hopefully less but again this is the SEC and the cftc there's also just regulation from Congress which is starting to gain some traction and they seem to be very serious about this because they know there's a lot of jobs that they're going to lose here and AI is going to take a lot of jobs and the US government knows that and so crypto is a place where that might bring a lot of jobs and coinbase were to leave that would be thousands and thousands Americans that would lose a job right I think that governments are not stupid they know that Bitcoin ethereum are gaining at the levels that they are and they're gaining adoption and this is a technology that's here to stay they're

not stupid so they know that there's a lot of jobs that can come from this and it's good for the world so I think the governments will get this right again SEC is not government that's a regulatory body I think they're the ones that just you know have some beef with cfdc and so there's this like child Elders fighting going on but I think ultimately the US will figure it out it's just going to take some time so I mean if you're building the space probably don't do it in the US just go elsewhere unfortunately because tokens can be a very viable tool for a business whether that is to raise capital or it's as a marketing tool or Rewards or loyalty or social status or whatever you're using those tokens for they can be very valuable to a business but you just don't have the ability to do a lot

of that or to use it in its full capacity in the US right now until we get clarity so if you want to start a business go to the UK go to Singapore go to Hong Kong go to Dubai go to El Salvador right there are options that's my advice so far yeah I think you nailed it with the 150 a year like if you just buy spots a crypto and Bitcoin and eat you would have you know exposure to that 150 a year and you wouldn't be part of the statistics where people lost money of like don't lack roads that's a good one you don't even like if something goes up 150 percent a year it's insane to go and take a loan out of that and buy more of it that's just wildness don't do that look I made that mistake I did it too when I first got into crypto

many years ago and I lost eth and I lost the Bitcoin and if I wouldn't have leverage I would have still had that and I would have gotten 100 per year on average instead it I got zero which is crazy to think of so don't get greedy and the other thing is buy these dips that was a great buying opportunity over the weekend to be completely honest so take advantage of this sorry Raul you can continue yep just wanted to remind people that 300 million dollars in liquidations happen on Saturday morning and if you're trading you would have probably been part of the statistic if you're trading on Leverage which is crazy 300 million just overnight yeah absolutely wild so unless you're a professional don't be taking up leverage don't be diving into coins right now it just doesn't make sense the risk rewards is not there at the moment wait

till we have more clarity for now though just hold these old Bitcoin and you're gonna do extremely well okay I think we made everything clear anything else you want to remember our listeners about being a session in our Discord tomorrow I'm not sure if you yeah podcasters will get this time I believe at 12 p.m EST inside the Discord we will be doing a what we call an eyes on chain event and uh basically we're gonna be looking at the top five charts top five themes with a bunch of charts to back it up um so to help you kind of navigate the space and understand what's happening on chain so make sure to come check that out we do it once a month we get a bunch of the community in and uh it's a great session we have time for AMA all that

kind of stuff so make sure to check that out if you haven't already podcast sensors you'll find a link to our newsletter in the show notes below which will give you more details on that and Twitter space people who are in here now or watching this later just go to our Lincoln bio and you'll see you'll see our newsletter link to get more info on that cool for sure doing tomorrow okay all right guys well thanks so much we're gonna uh Robin Pierre thanks so much everyone and we'll see you guys in the next one we do this every single Monday at 12 p.m EST so make sure to check us out next week thanks everyone and all the best thank you for listening to web3 Academy your one trusted source to capitalize on the next big phase of the internet if you enjoyed this episode

please share it and subscribe or follow so that you don't miss the next one while you're at it there's a link in the description for our free newsletter where we provide timely and relevant web3 insights so you can confidently build and invest in web 3. make sure to subscribe today one final note this podcast is for educational purposes only and nothing we say is financial advice crypto and Webster are risky and you should never invest more than you're willing to lose thank you friends and see you in the next one