Objective laws regulating crypto currency in the US - What would they look like?

 

Objective Laws Regulating Cryptocurrency in the US: An Objectivist Perspective

 As a starting point, I'll briefly recap the concept of objective law based on Ayn Rand's philosophy, and then apply it specifically to cryptocurrency. This will help frame what "objective" regulations might look like, contrasting them with the often arbitrary or subjective approaches seen in current U.S. regulations.

Recap of Objective Law

Objective law, according to Ayn Rand, is a system of rules based on reality and reason, designed to protect individual rights. It is grounded in the primacy of existence and the necessity of adherence to objective reality. Objective law is not arbitrary; it is derived from the facts of reality and the nature of man as a rational being who must act according to his own judgment in order to live.

The purpose of objective law is to provide a framework within which individuals can interact peacefully and productively, ensuring that each person has the freedom to pursue their own values without interference from others. This includes the protection of individual rights to life, liberty, property, and the pursuit of happiness.

In an objective legal system, laws are clear, consistent, and based on objective principles. They are not subject to the whims of rulers or the majority but are rooted in the recognition of objective reality and the requirements of human survival and flourishing. This means that laws must be understandable, stable, and uniformly applicable to all individuals, ensuring that justice is not a matter of subjective interpretation but of objective application.

The enforcement of objective law requires a limited government whose sole function is to protect individual rights by banning the initiation of force and fraud. This is achieved through the establishment of a system of courts, police, and military to adjudicate disputes, enforce contracts, and defend against external threats.

In essence, objective law is the application of rational principles to the governance of human interactions, ensuring that each person can live as a free and independent being. It rejects the notion of rule by decree or the imposition of collective will, upholding instead the sovereignty of the individual and the sanctity of individual rights [1][2][3][4][5][6].

An objective definition of objective law refers to a legal system that is based on clear, consistent, and universally applicable principles and rules. These laws are designed to be impartial, not influenced by personal feelings or opinions, and aim to ensure fairness and justice. Objective law is characterized by:

• Clarity: The laws are well-defined and understandable.
• Consistency: The laws are applied uniformly across all cases without favoritism.
• Universality: The laws apply equally to all individuals regardless of their status or identity.
• Impartiality: The laws are free from personal bias, prejudice, or subjective influence.
• Predictability: Individuals can anticipate the legal consequences of their actions based on the established laws.

This approach to law seeks to provide a stable and predictable legal environment where rights and responsibilities are clearly delineated and protected.

Applying Objective Law to Cryptocurrency Regulation in the US

Cryptocurrency (e.g., Bitcoin, Ethereum, and other digital assets) represents a form of private property and voluntary exchange enabled by technology. From an Objectivist viewpoint, cryptocurrency is a product of human ingenuity and rational self-interest, allowing individuals to store value, trade, and innovate without relying on centralized authorities like banks or governments. Objective laws regulating crypto should therefore focus exclusively on protecting individual rights—such as property rights, the right to contract, and freedom from force or fraud—while prohibiting any government initiation of force (e.g., arbitrary bans, excessive taxation, or coercive licensing that stifles innovation).

Current U.S. regulations (e.g., from the SEC, CFTC, IRS, and FinCEN) often fall short of objectivity because they are frequently vague, inconsistently applied, and influenced by political whims or collectivist goals (e.g., "protecting investors" through paternalistic oversight, which can infringe on personal judgment). For instance, the SEC's classification of certain tokens as "securities" can be subjective and retroactive, leading to unpredictability.

In contrast, objective laws for cryptocurrency would be minimal, principled, and limited to banning initiations of force and fraud. They would treat crypto as private property, akin to cash or gold, and ensure that individuals can use it freely in voluntary transactions. Below, I outline some examples of what objective laws might look like in the U.S. context. These are hypothetical proposals derived from Objectivist principles, not existing statutes, and they assume a limited government framework. They emphasize clarity, consistency, universality, impartiality, and predictability.

1. Protection Against Fraud and Theft (Anti-Fraud Laws):

   • Objective Principle: Laws must objectively define and prohibit fraud (e.g., misrepresentation of facts to deceive others) and theft (e.g., unauthorized access to digital wallets), as these initiate force against property rights.
   • Example Law: "Any individual or entity that knowingly misrepresents the value, security, or functionality of a cryptocurrency asset, leading to another's loss, shall be liable for restitution and penalties proportional to the harm caused. This applies universally to all crypto transactions, with clear evidentiary standards (e.g., proof of intent via documented communications). Enforcement shall be through civil courts, with no presumption of guilt based on asset type."
   • Rationale: This protects rational actors from deception without regulating honest innovation. It would cover scams like Ponzi schemes or fake ICOs (Initial Coin Offerings) but not voluntary high-risk investments. Predictability ensures users know fraud is punishable, fostering trust in the market.

2. Enforcement of Contracts and Property Rights:

   • Objective Principle: Crypto transactions are voluntary contracts; laws should enforce them objectively, recognizing digital assets as legitimate property.
   • Example Law: "Cryptocurrency holdings, including tokens, NFTs, and blockchain-based assets, shall be treated as private property under the law. Smart contracts (self-executing code on blockchains) shall be enforceable in courts if they meet objective criteria of mutual consent and clarity (e.g., verifiable on-chain records). Disputes shall be resolved based on evidence of agreement, without government approval required for creation or transfer."
   • Rationale: This upholds the right to trade and own property without interference. For instance, if a decentralized finance (DeFi) loan defaults, courts would enforce repayment based on the contract's terms, not subjective "fairness" judgments. Universality means the same rules apply to retail users and institutions.

3. Prohibition of Force in Transactions (Anti-Coercion Laws):

   • Objective Principle: No one, including the government, may initiate force; this bans mandatory disclosures or licensing that aren't tied to preventing fraud.
   • Example Law: "No individual or business shall be compelled to use or accept cryptocurrency, nor shall voluntary crypto transactions be subject to prior government approval unless evidence of fraud or force is present. Licensing for crypto exchanges shall be limited to verifying anti-fraud measures (e.g., secure custody of user funds) and applied consistently without discretionary vetoes."
   • Rationale: This prevents arbitrary regulations like the current "Know Your Customer" (KYC) mandates if they exceed fraud prevention. It ensures predictability—e.g., users know they won't face sudden bans on privacy-focused coins like Monero unless they involve objective harm.

4. Taxation Based on Objective Value (Minimal and Clear Tax Laws):

   • Objective Principle: While Objectivism advocates for voluntary funding of government, in the current U.S. system, taxes should be minimal, clear, and based on objective reality (e.g., treating crypto gains as capital gains without special penalties).
   • Example Law: "Gains from cryptocurrency transactions shall be taxed at the standard capital gains rate, calculated objectively based on verifiable market values at the time of sale or exchange. No additional surtaxes or reporting requirements beyond those for traditional assets (e.g., stocks) shall apply, ensuring uniformity. Tax evasion through fraud shall be prosecuted, but anonymous holdings are permissible if not used for illegal activities."
   • Rationale: This recognizes crypto as property while avoiding subjective "wealth taxes" or tracking that invades privacy. Predictability allows individuals to plan finances rationally.

5. Defense Against External Threats (National Security Provisions):

   • Objective Principle: Government's role includes defending against force, so laws could address crypto used in objective threats like funding terrorism.
   • Example Law: "The use of cryptocurrency to fund initiations of force (e.g., terrorism or violent crimes) shall be prohibited and punishable, with enforcement based on objective evidence (e.g., traceable transactions linked to criminal acts). No blanket surveillance of crypto users shall be permitted without individualized probable cause."
   • Rationale: This is consistent with protecting rights while avoiding mass surveillance, which is often subjective and rights-violating.

Benefits and Implementation

Under these objective laws, the U.S. crypto market would flourish as a realm of voluntary innovation, with government limited to refereeing disputes and preventing force/fraud. This contrasts with current subjective regulations (e.g., the SEC's "Howey Test" for securities, which can be inconsistently applied). Implementation would require reforms to agencies like the SEC and CFTC, emphasizing judicial oversight over bureaucratic discretion.

By adhering to objective law, a society can achieve a harmonious and just order where individuals are free to think, act, and trade according to their own rational self-interest, leading to progress, prosperity, and human flourishing—especially in innovative fields like cryptocurrency.

If you'd like examples of how these laws might be visualized (e.g., a diagram of crypto rights protection) or more details on current vs. objective regulations, let me know!

Sources:

1. Understanding Objectivism by Leonard Peikoff. Edited by Michael S. Berliner
2. Introduction to Objectivist Epistemology by Ayn Rand
3. Ominous Parallels by Leonard Peikoff
4. Ayn Rand Lexicon by Harry Binswanger
5. The Virtue of Selfishness by Ayn Rand
6. The Romantic Manifesto by Ayn Rand

(These proposals are philosophical applications and not legal advice; consult experts for real-world implementation.)