Congress, Not the SEC, Should Set U.S. Digital Asset Policy

The blockchain industry has attracted more than its fair share of scammers and fraudsters. The past two years have been especially painful as the collapses of Luna, Three Arrows Capital and FTX have brought the industry to its knees.

Thankfully those of us with a long-term vision finally have a market structure bill from Congress to look forward to. However, this progress is being threatened by the U.S. Securities and Exchange Commission (SEC), which is running a covert demolition job on the industry to protect its turf and advance the political aspirations of the current chairman.

Matt Walsh is a founding partner of Castle Island Ventures, a venture capital firm that invests in blockchain technology companies. Prior to founding Castle Island Ventures he worked at Fidelity Investments, where he led a number of the firm’s blockchain projects.

The SEC’s three-part mandate is to 1) protect investors, 2) maintain fair, orderly, and efficient markets and 3) facilitate capital formation. The SEC is supposed to be a disclosure-based regulator that is technology neutral, meaning they establish a framework for issuers to divulge pertinent information to investors, but do not unilaterally take a stance on which technologies ought to make it to market.

However, under this administration it is behaving like a merit-based regulator that sees itself as the arbiter of which technologies should exist in the United States. And it is doing this covertly by manipulating esoteric but consequential rules.

I have worked in the digital asset industry for over a decade and have been investing in blockchain startups for over six years. At Castle Island Ventures we have invested in over 50 startups, many that operate at the intersection of traditional finance and public blockchains.

Startups are moving offshore due to regulatory uncertainty

Based on our vantage point, it’s clear that the policies of the SEC are putting more U.S. investors in harm’s way by preventing trusted institutions from offering services, markets less orderly by forcing innovation offshore and impeding capital formation by throwing up unnecessary roadblocks for U.S. companies. In other words: the agency’s actions are negating precisely what it was founded to do.

Every day I speak with startups that are moving offshore and…