Disclaimer: The following op-ed represents the views of the author, and may not necessarily reflect the views of Bitcoinist. Bitcoinist is an advocate of creative and financial freedom alike.
U.S. Senator John Hickenlooper sent a letter to the U.S. Securities and Exchange Commission (SEC) and its Chairman regarding crypto regulation. A controversial topic in this country, the majority of government officials seem to believe in digital assets and Hickenlooper is no different.
In his letter, the government official reminds the regulator about his duty to “protect” investors, promote “responsible” innovation, and a clear framework. In that sense, he claims crypto and digital assets are being misused by people in the United States.
The Senators called for a “coordinated regulatory framework” between government agencies, and equal enforcement. In the North American country, the SEC and the Commodities Futures Trading Commission (CFTC) are tasked with oversight of investments and financial vehicles.
However, the SEC and the CFTC have been at a crosshair over which agency should regulate crypto. The SEC Chair Gensler already publicly expressed his desire to classify all digital assets, except for Bitcoin, as “crypto securities”, but the CFTC has challenged its sister agency.
The consensus amongst regulators in the U.S. seems clear only in the need to regulate and create rules that can be enforced without hindering innovation in the sector. The CFTC seemed more open to adopting this approach, but a series of legal actions against crypto projects have put this in to questioned.
Both agencies are perceived as proposed to engage in legal action, rather than come to a middle ground with projects in the nascent sector. In that sense, the U.S. Senators pointed out that the lack of coordination confused investors:
This creates uneven enforcement and deprives investors of a clear understanding of how they are protected from fraud, manipulation, and abuse. At the same time, as you have repeatedly noted, existing securities regulation does not cleanly apply.
Are Crypto Assets A Commodity Or A Security?
The U.S. government official emphasized that certain parts of the nascent assets class can be regulated by the SEC, but that another part does not fit with today’s securities laws. Despite the fact that investors in the U.S. have been interacting with crypto products, and demanding more access to these assets, regulators in the country failed to provide them with clarity.
In step, the SEC and CFTC have been unable to answer the question of which cryptocurrencies are securities and which are commodities, as Hickenlooper says in his letter to Gensler:
Given the complexity of these issues, and recognizing that some digital assets are securities, others may be commodities, and others may subject to a completely different regulatory regime, a formal regulatory process is needed now. This will significantly improve policy development (…).
The latter is something that a majority of participants in crypto and government seem to acknowledge, yet regulators have failed to take convincing steps in that direction.
As Bitcoinist reported, the SEC has chosen to bring action against high-profile individuals and companies for allegedly offering or promoting “crypto securities”. This is a term that the Commission is using with more frequency, but what is a “crypto security”?
The U.S. Senators have asked the SEC and its Chairman to answer this and other relevant questions. If Gensler replies, the nascent sector might finally benefit from having access to key information that might lead to the creation of a framework that promotes cooperation between industry actors and government agencies.