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Banksy: the missing link in crypto-regulation

Satoshi Nakamoto is to the world of finance, in some respects, what Banksy is to the world of London art.

The creator of Bitcoin and the infamous London street artist share key characteristics, to the point of sparking speculation that they are one when Banksy said “I am Satoshi Nakamoto” during an interview with thecointfront.com . The most obvious of these characteristics is anonymity. Theories regarding their identity are still considered hearsay.

Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), describes finance as “the neck of the hourglass”. It mediates between money transfer and risk, creating a centralized point of regulation. But a neckless hourglass is just a jar, which makes the decentralized world of cryptocurrencies a regulatory challenge.

The selloff has forced the crypto market capitalization below $1 trillion, and over $1 billion has been lost to crypto scams this year alone. It is clear that we cannot “put a square peg in a round hole”, i.e. we cannot apply the same regulatory frameworks from conventional assets.

Analyzing crypto-regulation through the lens of street art can provide insight into these challenges.

Creation

Banksy and Satoshi seemed to drop their idiosyncratic creations into the world overnight while onlookers had their backs turned. Banksy has always claimed his creations through social media posts, while Satoshi released a white paper titled “Bitcoin: A Peer-to-Peer Electronic Payment System” on Halloween 2008.

Similar to how anyone can do graffiti, almost anyone can create their own cryptocurrency. Low barriers to entry have left over 20,000 different cryptocurrencies in circulation.

Graffiti permission usually follows a simple rule: it’s good if you have the owner’s permission. A global body controlling whether new cryptocurrencies are allowed or banned could be a potential solution, with each country then choosing its level of adoption.

Prohibition

The removal of several Banksy artworks over the years has sparked outrage among locals. Following the removal and subsequent sale of ‘Hula Hooping Girl’ from Rothesay Avenue in Nottingham, Laura Rodgers, 63, of Hyson Green, told the BBC:

“It’s absolutely disgusting – this art was for the people of Nottingham (…) It was a kind of recognition of a poor, disadvantaged area. It meant a lot to people. »

Many local authorities have always been supportive of Banksy’s work because of the tourism and attention it brings.

Cryptocurrencies have also acted to support less developed regions. The World Bank estimates that 24% of the world’s population is unbanked. Nigeria ranks sixth with 60% of its population unbanked. Nigeria now recognizes Bitcoin as its national offering and is in talks with Binance to establish an economic zone for cryptocurrencies.

The main reasons for banning cryptocurrencies include anti-money laundering (AML), protecting investors from scams, and avoiding entrusting part of economic activity to a decentralized system and anonymous. China, a country with only 20% unbanked population (according to Statista), has completely banned cryptocurrencies for these reasons.

The global crypto ban regulation market is likely to be varied with respect to potential use cases for each country.

Classification

The key conceptual distinction that classifies Banksy’s illegal graffiti as works of art remains a mystery. Authorities usually decide whether or not to keep Banksy’s works based on public opinion, which some say is unfounded.

To reflect this in the crypto space, there has been talk around Gensler publicly acknowledging only Bitcoin as a commodity, while most other cryptocurrencies fall under the securities umbrella and are therefore subject to more regulation. strict.

This comes a year after Gensler faced intense scrutiny while testifying before lawmakers about his crypto-regulatory plans. The Howey test has been the SEC’s primary tool for determining what qualifies as an investment contract under US securities law. Stablecoins (cryptocurrencies whose value is pegged to another asset) have no inherent expectation of profit, but Gensler pointed out that some will nonetheless be classified as securities.

It looks like lawmakers and regulators will have to devise new tests to classify cryptocurrencies and be transparent with the public about how these methods work. This could be a natural first step in cryptocurrency regulation.