This week Gary Gensler had to answer for his own actions. This happened during a hearing before the House Financial Services Committee, about which we have written in detail.

The meeting revealed that Gensler was behaving much less bravely in front of his congressmen than in the SEC video. In particular, he was unable to say explicitly whether Etherium is a security, as Gary himself has previously stated on numerous occasions.

Overall, Gensler has been called incompetent on more than one occasion, while one congressman has even suggested his resignation.

What the SEC is being criticised for

As Paradigm’s experts point out, the US Securities and Exchange Commission is not fulfilling its primary function in terms of regulating the crypto industry. More specifically, the regulator does not provide investors and cryptocompanies with all the necessary information that would allow them to comply with the law and avoid receiving fines. Moreover, there is still no single control system for digital assets in the US, as the latter are regulated through securities laws that are several decades old.

Meanwhile, the same Europe has already come to an agreement on the issue. Earlier this week, the European Parliament passed the MiCA bill, which involves the creation of a single framework for regulating crypto across the EU. In a nutshell, the new legislative framework defines the regulations for cryptocurrency companies and ordinary businesses that want to integrate blockchain solutions into their operations. Most pleasingly, obtaining an appropriate licence in one of the EU countries will allow a company to operate in any state where the legal framework is recognised.

Paradigm notes that the current policy of cooperation with the Commission dates back to the 1930s, i.e. long before the advent of the internet. This scheme worked with centralised companies issuing securities, well the crypto industry is fundamentally different from such a centralised environment of traditional finance.

According to Cointelegraph’s sources, securities grant their holder legal rights against a centralised entity, but most cryptocurrencies do not have “legal rights” but rather “technological capabilities in the protocol”. In addition, crypto-assets can be completely independent of their issuer and maintain full functionality without its involvement.

Crypto can also be traded on a peer-to-peer network (P2P) and on a fundamentally different technology stack as opposed to traditional securities, which are traded based on an “archaic system full of intermediaries”. The venture capital firm’s experts concluded that the regulator urgently needs to change its modus operandi, otherwise it will achieve nothing by controlling the industry through coercion.

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Overall, crypto is a fundamentally new phenomenon compared to traditional assets, with the blockchain industry already showing the first signs of ‘maturation’. Nick James and Max Menzies of the University of Melbourne and Tsinghua University said in a recent research paper.

They set out to determine what role crypto plays in diversifying an investor’s portfolio, and how the crypto market compares to the traditional stock market. The experts’ findings show that while some key differences remain between the two areas, crypto is starting to show tangible and visible signs of maturity. Here is a relevant rejoinder from the experts.

Overall, we have found nuanced similarities and differences between the cryptocurrency and stock markets. These mathematical properties signal increasing signs of maturity in collective dynamics and the benefits of diversifying across different portfolio spreads.

Researchers have used the collective dynamics approach to identify mathematical properties. This method is based on measuring interactions between groups of data, called “hierarchical clustering. To compare two markets, they measured the diversification spreads of the respective portfolios.

Both markets showed similar hierarchical clustering. The authors of the study also argue that there is evidence of a “best value” crypto portfolio. In other words, cryptocurrencies offer more investment diversification opportunities with the same risk for investors with relatively small capital.

Crypto is often referred to as an “immature market with high volatility,” but the research clearly suggests otherwise. Given the choice of all existing assets, crypto no longer looks too risky an investment. This is especially true after the events of March 2023, when a sudden collapse hit major US banks. The situation showed that traditional financial institutions are not as safe as is commonly believed.


Paradigm analysts' criticism is understandable. Still, the actions of US regulators are really hurting the cryptocurrency industry, as well as damaging the US. As it became clear this week, many companies are preparing to leave that jurisdiction for a more adequate legal framework. Perhaps this will force US politicians to influence the situation with the Securities and Exchange Commission. Otherwise the US will lose credibility in the world of finance.