Perhaps see that Sooner or later legislation will come into play for cryptocurrencies, the industry has rallied behind the effort to pass a new crypto-only regulatory framework — a complete rage release framework. full of Howey test. Companies, including Coinbase, have beg SEC to issue new rules, specifically for cryptocurrencies. Meanwhile, in the Senate, two different bills will transfer power from the SEC to the Commodity Futures Trading Commission, seen by many as lighter and more industry-friendly. At any crypto conference and in countless op-eds and congressional hearings, you can hear crypto executives and their supporters complaining about injustice. of “regulation by enforcement”. They argue that the government has not made clear regulations, leaving companies uncertain how to proceed without being sued.
Brandon Neal, chief executive officer of Euler, a decentralized finance project, said: “The regulatory landscape in the US is at its best. “Not only does it create a lot of confusion in the industry and the public, but I think it has the potential to stifle innovation.”
However, for many securities law professionals, nothing is a pipe dream. “You will not be breaking the SEC disclosure laws if you register and disclose,” said Roger Barton, managing partner of Barton LLP. “I believe the securities laws are clear enough. I didn’t know that the SEC needed to create specific rules regarding cryptocurrencies.”
It sounds intuitive that new technology requires new rules and regulations. But many securities attorneys believe that the general approach exemplified by Howey checks are part of the reason why US securities regulation has performed quite well over the years. “The downside to providing clarity — and this is why we don’t define “cheating” in the law either — is that as soon as you write down what the parameters are, you are presented with a road map. go around it,” said Hilary Allen. “So testing needs to be flexible. The downside to that is that there will be some uncertainty about how it is applied. “
In fact, no bill in Congress is likely to become law anytime soon, and the SEC is not going to ignore it and issue new rules. That makes “regulation by enforcement” the only item on the menu. No one can say exactly what will happen to the crypto industry if the SEC starts winning these big cases. Penalties for issuing unregistered securities can range from fines to criminal prosecution if fraud is committed. Perhaps most alarmingly for the industry, anyone who invests in something that is later considered a security has the right to get their money back. That means crypto startups whose tokens have dropped in value could face massive class-action lawsuits. Meanwhile, crypto entrepreneurs will likely be hampered by the effort and costs involved in registering a security with the SEC.
“Requiring disclosure will increase costs, and perhaps 80 to 90 percent of these projects will never succeed,” says Diamond.
The industry largely seems to agree – hence its objection. In a regulatory filing, Ripple argued, “The requirement to register XRP as a security measure reduces its primary utility. That utility relies on XRP’s near-instant and seamless settlement of low-cost transactions. In general, opponents of the SEC’s approach say it will kill innovation and drive all the most talented crypto entrepreneurs to countries with more lax regimes.
Whether this will ultimately be good or bad depends on several philosophical questions about cryptocurrencies. If you think that cryptocurrency is a great innovation that will unlock all kinds of use cases that were impossible to date, then you might think that it is important to create a regulatory mechanism. The resilience helps the sector grow at the expense of complex investor protection. On the other hand, if you still don’t believe that cryptocurrencies have done anything but create speculative asset bubbles, you probably don’t. Instead, you might conclude that an industry that cannot survive if it is subject to laws protecting investors is not an industry worth saving.
