14th September 2024 > > The SEC gets it wrong again.

tl;dr

We should be grateful to Rachel Reeves for highlighting the dangers of black holes wherever we look. The SEC loses credibility once again, with a screeching U-turn that contradicts its own settlement. Gensler must go.

Market Snap

Market Wrap

A breach to the upside of $60k is welcome after all the doom and gloom of the past couple of weeks, for reasons that completely escape me. Speculators are of course impatient but the time for taking that approach is long past. The last month has seen the BTC price oscillate between $54k and $64k, price action that is simply not out of the ordinary. If you are convinced of the long-term trajectory of cryptos, do not fumble your bags now. If you are unconvinced, take the cash and move on right away.

Occasional Series – UK budget

We are mere weeks away from a devastating tax raid on aspiration via CGT and wealth taxes that will encourage consumption over investment, dealing a fatal blow to any hopes of an improvement to UK productivity.

The reason, as we are all too well aware, is the £22bn “black hole” uncovered by Rachel Reeves, Chancellor of the Exchequer, who has conveniently forgotten that over half of the total is due to back-dated inflation busting pay rises to train drivers and their ilk, a decision in which she is fully complicit. Some of that cash is even going to those who no longer drive trains, which is a nice little bonus for some.

In 2022, UK GDP was estimated at over $3 TRILLION. Call that £2.5 TRILLION for 2024, and this “black hole” amounts to 0.9% of annual GDP, a rounding error if ever there was one. Here are just three of many 0.9% black holes we are all familiar with:

Weekend in Ibiza. I know, since Space has closed there is little point, but back in the day a £1,000 budget for a weekend of fun meant a lot of fun. Watch out though for the black hole of £9 in that budget caused by ordering just one too many halves of lager during your three-day bender.

Daily coffee allowance. Your favourite coffee shop is threatening to blow apart your daily £5 budget for coffee by causing a black hole with a price increase of as much as 4.5p.

Slap-up lunch for two. Your £100 budget for a decent lunch and a fine rose could be devastated if you underestimate the cost of your postprandial cognac by just 90p, a black hole of frightening proportions as Reeves keeps reminding us. If you both walk home afterwards, you can easily make it up by avoiding a combined £3.50 bus fare.

Curious Cryptos’ meme corner

Curious Cryptos’ Commentary – Is this an SEC win or a loss?

The SEC brought charges against the US entity of eToro accusing it of operating as an unregistered broker and clearing agency for securities in the form of cryptos. That action has been settled with a pitiful fine of $1.5mm and no acknowledgement of guilt by eToro:

https://www.sec.gov/newsroom/press-releases/2024-125

This regulation by enforcement strategy of the SEC provides no clarity to anyone, though the press release above makes a fallacious claim to the contrary. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, is quoted as saying:

“By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework. This resolution not only enhances investor protection, but also offers a pathway for other crypto intermediaries.”

Why is it that government agencies and their senior staff are allowed to simply lie, time after time after time?

Apart from my gripe above, there is an added layer of interest here that the eagle-eyed will have spotted.

eToro has agreed to remove all cryptos except for BTC, BTC Cash (which uses the same PoW consensus as BTC), and … drum roll … ETH from its trading platform. Though this case was settled out of court (and therefore provides zero clarity from a legal perspective despite Grewal’s gaslighting attempts to convince us otherwise) it is going to be hard for the SEC to justify in the future any claim it may make that ETH is a security.

Gensler and his naysaying cronies weave a tangled web that will only ever trip themselves up.

Curious Cryptos’ Commentary – And this is definitely a loss for the SEC

And this is a demonstration of how the SEC falls flat on its face.

The SEC is currently litigating against Binance claiming that ten coins on the Binance platform are securities: BNB, BUSD, SOL, ADA, MATIC, ATOM, SAND, MANA, AXS and COTI.

Paul Grewal (no relation to the Grewal above), Chief Legal Officer for Coinbase, has highlighted a damning change in a footnote to the SEC’s “Amended Complaint” against Binance:

https://x.com/iampaulgrewal/status/1834447203680825809

The SEC is now claiming that its use of the term “security” does not apply to the crypto asset itself but rather that it is an accusation against the way that it is being sold:

“… the SEC reiterates (yeah right – Ed.), with its use of the term “crypto asset securities” the SEC is not referring to the crypto asset itself as a security … the security in this case … consists of the full set of contracts, expectations, and understandings centred on the sales and distribution of the crypto asset.”

Which is in complete contradiction to the settlement with eToro we discussed earlier, a settlement which focussed on the coin, and not the sale and distribution of the coin. Indeed, the sale and distribution of BTC, BTC Cash, and ETH has been allowed though it does not differ in any material way.

Extraordinary.