Crypto Leaders Urge Congress to Regulate, Clarify or Watch Tech Exodus
At a meeting with U.S. lawmakers on Capitol Hill, over 50 finance, investment, and crypto leaders urge Congress to regulate and give clarity to crypto or create an exodus of technology from the U.S.
72-year-old Laws Don’t Cut the Modern-day Mustard
The “Howey Test”, from a Supreme Court decision made in 1946, is what the U.S. Securities and Exchange Commission uses to determine whether an instrument is a security or not. Under that test, tokens are presumed to be deemable as securities, and therefore subject to SEC oversight.
The industry group that met on Capitol Hill argued that, given the SEC’s reluctance to depart from that test, it is up to Congress to pass new laws that suit digital assets and the brave new world of blockchain technology.
Chief legal and risk officer at Coinbase, Mike Lempres, said:
“We all want a fair and orderly markets, we want all the same things regulators do… It doesn’t have to be done in the same way it was done in the past, and we need to be open to that.”
Circle’s senior regulatory counsel, Carla Carriveau, a former SEC employee, backed that argument, claiming that while the SEC could make exceptions and offer greater clarity, it was up to Congress to shoulder the regulatory burden required to bring crypto into the realm of full legal legitimacy:
“Congress has to act because the SEC has said what they thought was right, and already did what they thought they needed to do.”
Regulate or Cause a Tech Exodus, Crypto Leaders Urge Congress
As the U.S. procrastinates, projects move abroad to friendlier jurisdictions. With the SEC refusing to provide regulatory certainty to the crypto economy, startups are operating out of the likes of Malta, Switzerland, and Estonia. Most ICOs refuse to accept funding from American citizens, given the risk that U.S. regulators will deem their tokens to be securities.
Kraken co-founder and CEO, Jesse Powell told representatives:
“Foreign companies are able to outraise their U.S. competitors and often whoever raises the most money is who wins. Not only are U.S. companies not able to raise enough to compete globally, U.S. investors are not able to invest in these global companies.”
Advocates Converge on Capitol Hill, as Crypto Leaders Urge Congress to Usurp SEC
The group described the often chaotic climate startups were operating in, with no indication of whether their initial coin offerings were securities or not. Many argued utility tokens should be governed by the friendlier CFTC as commodities, and not by the SEC as securities.
The SEC has stated bitcoin is not a security and Ethereum is no longer a security, though it probably was when it launched. It has failed to offer definitive conclusions on other tokens, allowing lawyers to sue where investors see opportunities to do so, and punishing the occasional project. It is a scattergun approach to regulation.
The benefit of legislation from Congress would be immediate, the group argued, provided it did not regulate too harshly. Per David Forman, chief legal officer of Fidelity Investments:
“If the rules are unclear, unwritten, or unknown it’s not appropriate to punish people for making the wrong guess.”
Darren Soto, D-Fla who was among the lawmakers present at the four-hour discussion, offered some potentially hopeful remarks:
“I’m sensing we may need an entirely new category that treats this like a new asset, so that we’re not trying to squeeze a square peg into a round hole. There needs to be some streamlining based on the definitions of digital assets.”
A bill is being prepared for this Fall by Rep. Warren Davidson, R-Ohio, who hosted the roundtable discussion. Reps. Ted Budd, R-N.C. and Tom Emmer, R-Minn. were also in attendance.
Have your say. As crypto leaders urge Congress to regulate, is the U.S. at risk of falling behind? How quickly will Congress be able to act?
Images via Pixabay