a16z argues that current regulations favor meme coin speculation over innovative projects: SEC failing to achieve each role's objectives

The venture capital firm a16z Andreessen Horowitz recently pointed out through a blog post that current regulatory policies in various countries mostly lean towards resisting or completely banning cryptocurrencies, which may inadvertently favor the growth of high-risk tokens like meme coins and put genuinely innovative projects and teams under regulatory pressure.

Is Regulatory Enforcement the Root Cause of Crypto Crime?

Chris Dixon, a general partner at a16z who previously published a book titled "Read Write Own" focusing on the long-term implications and development challenges of the Web3 industry, has expressed in his latest article that the current regulatory policies, primarily in the United States, are stifling the entire crypto industry and may even be at odds with the regulators' own principles.

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At the beginning of his article, Dixon points out the significant issues in the blockchain and cryptocurrency space:

Why does the market always repeat these cycles and patterns instead of supporting truly innovative and more productive blockchain products that bring about change?

He notes that the crypto market, often driven by speculation, is filled with utility tokens based on various projects and meme coins that lack practical applications, with the latter playing a crucial role in the industry and often being central in certain malicious events.

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However, Dixon attributes the fundamental cause of this phenomenon to the regulators themselves:

The current unclear regulatory policies and improper enforcement methods make speculative tokens like meme coins popular while practical and productive blockchain utility tokens are constantly worried about regulatory crackdowns.

He adds, "In fact, launching a meme coin without real use cases today is safer and easier than designing a project token with genuine utility."

Crypto Market Inclined Towards Speculation

First, echoing the content of the "conflict between computer culture and speculative markets" mentioned in his previous book, Dixon points out that the widespread "computer" and "casino" culture in the current crypto market is increasingly leaning towards the crisis of speculative tokens, attributing it to regulatory authorities.

However, he also believes that as time progresses and the market matures, the speculative culture will diminish, and meme coins may begin to explore the integration of practical use cases.

a16z Criticizes SEC: Fails in Every Responsibility

Dixon highlights the U.S. Securities and Exchange Commission (SEC), emphasizing that the SEC, which was originally intended to encourage industry innovation through legal frameworks while protecting investors, maintaining fair order, and promoting capital formation, has failed to achieve even a single goal when it comes to the crypto space.

Unclear Crypto Regulation

Dixon states that the vague state of current regulatory policies leaves crypto platforms and entrepreneurs living in fear, concerned that their tokens may be deemed securities.

Even though Bitcoin and Ethereum, due to the absence of a managing entity, are less subject to SEC's "Howey Test" securities evaluation method; however, other projects may not be as fortunate:

Unfortunately, entrepreneurs building innovative projects other than Bitcoin and Ethereum do not know how to obtain the same regulatory treatment.

He indicates that the SEC lacks a clear and candid approach, leading to many doubts and uncertainties within the industry through direct enforcement actions.

Inappropriate Crypto Enforcement

Dixon further emphasizes that while the Howey Test is a reasonable evaluation basis, it remains subjective, and the SEC has consistently expanded its meaning improperly, causing panic among teams focused on developing solutions:

The SEC has so broadly expanded the meaning of the Howey Test that ordinary assets, even items such as Nike shoes, could be considered securities today.

At the same time, meme coin projects without developers or management teams may not meet the securities criteria of the Howey Test. Dixon is concerned that the proliferation of meme coins while hindering innovative projects may lead to more rampant scenarios:

Investors may face more risks as a result, rather than less.

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Dixon's Regulatory Recommendations

Dixon acknowledges that stronger regulation is indeed needed in light of frequent crypto crime incidents and proposes better specific regulatory solutions:

Including disclosing risk information for different projects individually or requiring longer token lock-up periods to prevent rapid enrichment intentions and incentivize longer-term development.