Satoshi Nakamoto is to the finance world, in some ways, what Banksy is to London’s art world.
The creator of Bitcoin and the infamous London street artist share key characteristics, so much as to spark speculation that they are one and the same when Banksy stated “I am Satoshi Nakamoto” during an interview with thecointfront.com. The most apparent of these characteristics is anonymity. Theories regarding their identities are still considered to be hearsay.
Gary Gensler, Chair of the Securities and Exchange Commission (SEC), describes finance as ‘the neck of the hourglass’. It acts to intermediate the transfer of money and risk, thus creating a centralized point for regulation. But an hourglass without a neck is simply a jar, making the decentralized world of cryptocurrencies a regulatory challenge.
Mass sell-offs have forced the crypto market cap below $1 trillion, and over $1 billion has been lost to crypto scams this year alone. It is clear that we cannot “fit 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
Both Banksy and Satoshi seemed to drop their idiosyncratic creations into the world overnight while onlookers had their backs turned. Banksy has historically claimed his creations via social media posts while Satoshi released a white paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ on Halloween of 2008.
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By GlobalDataSimilar to how anyone can graffiti, almost anyone can create their own cryptocurrency. Low barriers to entry have left over 20,000 different cryptocurrencies in circulation.
The authorization of graffiti generally follows one simple rule: it is okay if you have permission from the property owner. A global body controlling the permission or prohibition of new cryptocurrencies could be a potential solution, with individual countries then choosing their level of adoption.
Prohibition
The removal of multiple Banksy art pieces over the years has sparked outrage from locals. Following the removal and subsequent sale of ‘Hula Hooping Girl’ from Rothesay Avenue in Nottingham, Laura Rodgers, 63, from Hyson Green told the BBC:
“It’s absolutely disgusting – this art was for the people of Nottingham (…) It was some recognition of an area that is poor, underprivileged. It meant a lot to people.”
Many local authorities have historically been in favor of Banksy’s work due to the tourism and attention that it brings.
Cryptocurrencies have similarly acted to support less developed regions. The World Bank estimates that 24% of the world is unbanked. Nigeria ranks as the sixth-highest with 60% of its population unbanked. Nigeria now recognizes Bitcoin as its national tender and is in talks with Binance to establish an economic zone for cryptocurrencies.
The major reasons for banning cryptocurrencies include Anti-Money Laundering (AML), protecting investors from scams, and avoiding handing over portions of economic activity to a decentralized and anonymous system. China, a country with only a 20% unbanked population (according to Statista), has completely banned cryptocurrencies for these reasons.
The global regulatory market for crypto-bans will likely be varied concerning the potential use cases for each country.
Classification
The key conceptual distinction that classifies Banksy’s unlawful graffiti as artwork is still a mystery. Authorities generally decide whether to keep Banksy’s artwork based on public sentiment, which some argue is unfounded.
To mirror this in the crypto space, there has been discussion surrounding Gensler only publicly acknowledging Bitcoin as a commodity, while most other cryptocurrencies fall under the securities umbrella and thus fall subject to tighter regulation.
This comes a year after Gensler came under scrutiny when testifying before lawmakers on his plans for crypto-regulation. The Howey Test has been the primary tool for the SEC when determining what qualifies as an investment contract under US securities law. Stablecoins (cryptocurrencies whose value is pegged to another asset) do not have an inherent expectation of profit, but Gensler has outlined that some will classify as securities, nonetheless.
It seems as if lawmakers and regulatory bodies may have to devise new tests to classify cryptocurrencies and be transparent with the public regarding how these methods work. This could be a natural first step in regulating cryptocurrencies.
