While there is no one better suited to the task of proposing a regulatory scheme for crypto assets than Commissioner Peirce, she is subject to one fundamental limitation that she cannot control. Every substantive question that she asks must be preceded by first addressing the metaphysical question of whether the asset at issue is a "security."

This is a waste of time and effort and is no different than arguing as to . (See ; and .)

Having to answer this question is…

It is fine to argue that government should be proactive, not merely reactive. But there is a difference between being proactive and just having a general feeling of anxiety, even if the anxiety has justification. Creating regulatory systems based on anxiety will result in a government that is big and directionless.  

The refusal of the bank regulators to allow banks to custody digital assets has likely resulted in significant damage to investors. Had the bank regulators permitted banks to provide custodial services, the losses at, for example, FTX, would likely have been far lower—as investors would have used regulated bank custodial services rather than relying on FTX.  

These Executive Orders signal a massive cultural shift for the regulators. For many years, it has been largely expected that laws and rules would simply accrete, along with the size of the government. New problems would bring new rules and new agencies, and there would be little meaningful re-examination of whether an existing rule was still needed, or even whether it had worked in the first place.

A cultural shift that assumes that an adopted rule is not an inherently forever thing,…