On March 21, USA Securities and Exchange Commission (Sec) was hosting the first in a series of public round table entitled
“How we got here and how we come out – define security status. “ Although it was open to the public, the discussion was largely formed by a hand -picked group of lawyers and decision makers who have played key roles in blockchain and digital asset ecosystems over the past decade.
The goal of the round table was to find out how to define cryptocorate within the US regulatory system – and more specifically if they meet Criteria for being marked as securities.
Lucky for you, I sat through the hour and 40-minute very technical legal discussion, so you don’t have to. Here is what stood out, what surprised me and what everything can mean for the future of digital currency policy in the United States.
The surprising driving force for classifying ‘Crypto’ as a security
The first thing that caught me outside was the tone. Given that many panel participants have worked directly with or next to the crypto industry, I expected a strategy that was almost blind Pro market in a way that was in line with the White House’s wider hand-off, take down the protective rails, let it be a free market strategic that was not the case.
Some panelists claimed quite strongly that crypto should be regarded as a security and point to the four prongs in Howey test As a frame that fits many current crypto projects. Others drove back and claimed that not all crypto courses meet the Howey criteria. Still, what was clear is that no one on the panel believed that crypto should be allowed to work in regulatory ambiguity.
For those who believed the Howey test is outdated or inappropriate for modern digital assets, was a potential way forward discussed legislative measures, Congress changed securities laws To specifically include cryptocurrency. The panel then acknowledged that although it sounds simple in theory, it would be complicated by the fact that securities are not all treated equally because shares, investment contracts and other financial instruments all have different handling requirements and protection.
If crypto is not a security, what is it?
The natural counterpoint to explain crypto A security is to notice it something else – usually a commodity. In fact, several supervisory authorities have already said in the post that some cryptocoirs, especially Bitcoinare goods.
But the round table marked why that route creates its own set of problems. The Trade Development Commission
(CFTC) monitors raw materials, but as Benjamin Schiffrin, head of securities policy in better markets, pointed out under the round table, that agency was never designed to protect retail investors. CFTC’s mandate focuses on market integrity and preventive manipulation in commodity trade, but it was never built to protect everyday investors. On the other hand, securities law is specifically designed with retail protection in its core.
“Is it really the right thing to say that CFTC, for example, should be the controller for crypto?” Schiffrin asked. “My concern that CFTC does not have an investor’s protection assignment … which would be good if crypto is not marketed to retail investors, but I think that is.”
Schiffrin claimed that crypto adapts closer to the definition of security – not only because of the Howey test, but because of the type of protection that the securities frame is designed to provide. His point emphasizes one of the deeper truths behind this debate: The question is not just legal classification – it is about investors’ protection.
The crypto -compliance problem
Another topic raised under the round table was whether the crypto industry has done enough to follow existing regulations– Or if Sec has created a system so uncommon that compliance is practically impossible.
Panel participants seemed to agree at least one thing: Sec’s current framework is outdated. While previous Sec -Chairman Gary Genser Quickly criticized crypto companies for not registering, the insiders of industry claim that many have tried – and failed – because the guidance they have received is vague, outdated or both.
“It’s not really fair to say that the industry has just decided not to follow,” said Miles Jennings, general lawyer at the A16z Crypto. “If you look at those who tried to come in and register, everyone went bankrupt. The SEC has not provided any guidance to the industry since 2019 – although the technology and the approaches that the companies take have changed significantly every year.”
Jennings Said This Leaves Lawyers Advising Clients Based on Outdated Guidance that No Longer Fits The Realities of the Industry, Which Not Only Puts The Client In A Difficult Position Trying To Proceed as a Business But the Lawyer in a Challenge Too many times, Especialy When Another Player In The Industry Seems to have figured out how to proceed with the items their Lawyer was Advising Against.
Although the group did not come up with a fixed conclusion on how cryptocorate would be classified, they agreed that crypto must be classified as something. It’s not just to protect investors. It is in favor of the companies’ building in this space, which many really want to play according to the rules, but just do not know what these rules are.
How regulatory round tables can shape Crypto’s future
Many of these hearings and round tables often feel like policytater, but that does not mean that they do not matter.
What is said in these rooms is quoted in memos is referred to in policy drafts and echoed in legal panties; It can also set the tone or act as reference material for future politics; And in an industry that has been shrouded in regulation uncertainty are the reference points.
“Many have long asked for a regulatory framework for crypto – one that is useful – and now we have the opportunity to be part of constructing it,” Sec said under its closing remarks. They also noted that individuals should continue to contribute to Dedicated website where the public can hand in their input to SEC’s Crypto Task Force To help shape future frameworks, which is undoubtedly a small move, but one that can make a significant difference in how the supervisory authorities engage in the crypto space that is moving forward.
Watch: Reggie Middleton on Defi, Booms/Busts & Crypto Regulation
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