Yesterday, cryptocurrency industry leaders, Wall Street representatives, and venture capital firms met lawmakers to urge them to act and pass comprehensive regulation for the cryptocurrency space. Their message was a simple one: if regulation for the cryptocurrency space is not figured out soon, all its innovation will have no choice but to leave the United States.
Although competition is fierce abroad, the United States has a real chance to lead this new blockchain revolution — if they are able to properly get their regulatory environment in check. This was the message from more than 50 industry participants who were on Capitol Hill on Tuesday. They all came from a roundtable discussion held by Warren Davidson, a representative from Ohio.
Many politicians have begun to talk about the need for a clearer regulatory environment. Congressman Warren Davidson has called the language in the law right now “sloppy.” Tom Emmer, a Congressman from Minnesota, is looking to propose three cryptocurrency related bills to clear up the current confusion on these digital assets.
The main concern has been the application of old, archaic laws relating to financial assets and applying them to cryptocurrencies. For example, in one such instance, there is the use of the 72-year old ‘Howey Test’ which was established in a 1946 Supreme Court decision. The test has been used for some time to determine whether or not a financial instrument is a security. This same standard has been attempted to be applied to cryptocurrencies with little sense. The SEC Chairman Jay Clayton has made it quite clear that he does not plan to update these same standards just for cryptocurrencies.
In another area of concern, others have been scrambling to figure out whether or not ICOs were legally compliant since they were also in dubious legal waters. Because these ICOs have some “utility,” some have argued that they deserve not to be treated as securities. According to the SEC now, all ICOs except Bitcoin and Ethereum are securities.
The panelists at the roundtable on Capitol Hill discussed the terrible effect further uncertainty could have on the space, and many may be heading for the exit door if this continues. David Forman, chief legal officer at Fidelity Investments, said bluntly: “If the rules are unclear, unwritten, or unknown it’s not appropriate to punish people for making the wrong guess.”
Darren Soto, D-Fla seemed to agree with this sentiment.
“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.”
This what many cryptocurrency experts and legal advisors have been clamoring for: cryptocurrency as a new asset class. But for now, the regulatory framework needs to be straightened out. And the meeting of these leaders on Capitol Hill shows how urgent it has become.