The SEC's apparent U-turn on crypto regulation is being hailed by many as a victory for innovation and a sign of the US embracing the future of finance. Who exactly is this victory for? The voices that are being drowned out by all this celebratory hoopla? In our haste to board the train of progress, are we creating in the new digital divide a Berlin Wall of our own making?

Capital Flight: A New Gold Rush?

Let's be frank. The move away from “regulation by enforcement” and toward working with industry feels like opportunity. This new movement, led by Hester Peirce and likely soon by Paul Atkins—another of such leaders—clearly indicates American opportunity. As the SEC appears to be lowering their sword, get ready for a tidal wave of capital swarming back into US-based crypto ventures. a16z looking to reestablish their monopoly on the US market already is a pretty big signal.

What about developing nations? Countries that have been taking a more measured approach to finding ways to use crypto to empower their citizens and promote financial inclusion? Will investors flock to the safety and opportunities offered by a US-regulated market? If so, won’t that starve the nascent crypto ecosystems of resources? It truly does feel like we’re witnessing a modern-day gold rush. This time, though, the gold is very much digital — and the wagons are already circled, driving straight toward Washington. This is a problem that is larger than investment alone. It’s not just the loss of talent, ingenuity and the promise of economic empowerment that is being removed from people who most desperately need it.

Smaller Projects: Squeezed Out Again?

This is not only a concern for the global economy. Now, picture those crypto projects that have been able to work in relative independence, out of the jurisdiction of US regulators. Most of these are fueled by the passion and belief of the creative visionaries that we can have a more decentralized, accessible and fair financial ecosystem. Or will they be able to hold their own against the deep pockets and regulatory advantages currently enjoyed by larger, US-based competitors?

We've seen this movie before. Too often, big players, with deep wells of institutional support, run roughshod over the competition, elbowing smaller innovators out of the way. This SEC change would provide much-needed benefits to the US crypto ecosystem. In doing so it might inadvertently stunt global innovation and diversity. Consider a future where a handful of US-based titans of crypto monopolize the political and economic landscape. They control the access, define the terms and enjoy most of the spoils. Is that really the decentralized future we were all sold?

Regulatory Challenges: An Uneven Playing Field

Developing countries are in a particularly difficult position when it comes to regulating crypto. They too frequently don’t have the financial resources, jurisdictional expertise, or settled legal frameworks necessary to properly regulate this fast-paced technology. Yet the SEC’s actions—misguided and reactive—though aimed at injecting clarity and stability into the US market, would only muddy these efforts further.

  • Limited Resources: Developing nations often have limited resources to dedicate to crypto regulation.
  • Lack of Expertise: There is a shortage of experts in crypto regulation in many developing countries.
  • Evolving Technology: The rapidly evolving nature of cryptocurrency makes it difficult to regulate.

This new enforcement approach of the SEC produces a moving target, making these countries continuously play catch up with their policies. The danger couldn’t be more obvious. Harmful state/city regulations hamper innovation, create room for arbitrage while further subjecting our most vulnerable populations to scams and exploitation. It’s the equivalent of trying to erect a permanent structure on quicksand – just never going to work out in the long-term.

The strife behind the scenes at the SEC, recently called out by Commissioner Caroline Crenshaw as indefensible, points to the tangled interests surrounding this issue. This is not so much about right versus wrong, as it is a question of tradeoff judgment with possible widespread impact.

Let’s not lose sight that the SEC decisions serve as focal points for international development of crypto regulatory standards.

Forgotten Voices: A Call for Equity

We would do well to listen to the voices of those who have the most to lose in this continued shift. The entrepreneurs in developing countries who are just as often, if not more so, seeking to develop innovative solutions to their home-grown problems. Or these are the retail investors, looking to crypto to help them achieve their financial goals. For the communities that are looking to use blockchain technology to develop highly transparent and accountable systems.

These are the voices—that fierce urgency of now—that we need to be hearing and elevating. We need to ensure that the international crypto ecosystem remains open and fair. It must not devolve into a mere sandbox for rich countries and big business. We must join forces to train developing nations to establish effective regulatory structures. By encouraging innovation and protecting our citizens, we can make sure they are leading participants in this new digital economy.

This isn't about hindering US innovation. But we must make sure that everyone wins from the crypto revolution. Of course, it’s important that these new advantages aren’t limited to only a couple winners. It’s about creating a decentralized future worth having, one that supports the people and communities of the globe. The SEC's crypto shift has the potential to do good, but only if we remain vigilant and committed to ensuring that it doesn't widen the global divide.

Is the US setting ourselves up to ensure that this fantastic technology can only be fully enjoyed by the privileged few? In our race towards innovation, are we forgetting our core values of decentralization? Are we, too, missing the inclusivity that fuels the crypto revolution? These are the questions we should be asking ourselves, well before it's too late. Before the digital Berlin Wall goes up.