Bloomberg: US regulation in 7 questions

This week, Bloomberg offers us its Quick Take column on cryptocurrencies. In this column, Benjamin Bain and Camila Russo shed light on the regulation in the United States in the form of 7 questions and answers.

1. How does the government categorize cryptocurrencies?

It all depends on who you ask. For the CFTC , cryptocurrencies are commodities , since 2014 . In addition, she has repeatedly asserted her competence in cryptocurrency derivatives . As far as the SEC is concerned , the debate is still raging on the qualification of financial securities - or securities in English - for cryptoactives having used an ICO. Finally, for the tax authorities , cryptocurrencies are considered as a good in the context of taxation .

2. What does the cryptocurrency industry think?

A majority of actors complain about regulatory uncertainty . However, there are many who argue against regulation in that it could undermine their business model. For example, the SEC states that it is through the application of the Howey Test that the classification is made. While, cryptobusiness claim that this test is not adapted to the reality of digital currencies . The SEC should have innovated, which it still has not done.

 

3. Does this mean that Bitcoin is a financial title?

The situation of Bitcoin is clearer, it is not a financial title . It was not used to fund a company . Therefore, it can not be qualified as a financial title, in that it does not represent a common investment, which is one of the three criteria of the Howey Test.

4. How are cryptocurrency skills issues addressed?

The SEC works jointly with the CFTC and the Treasury Department . However, in the absence of a national strategy most advances are state by state .

5. What does the crypto industry do about it?

The industry had two reactions. The first was the intensification of lobbying by the federal authorities. The second is a transformation of how ICOs are made. Twelve billion dollars were raised through ICOs in the first quarter of 2018 .
Some people now propose tokens that are supposedly utilitarian , but the real usefulness of these tokens is still to prove . This approach has been adopted to avoid classification in security . These tokens are therefore intended to be used for goods and services once the start-up is launched .
Others, officially offer financial securities tokensand attempt to comply with the laws in force. In particular by limiting investment opportunities to offer the token to institutional investors or wealthy individuals .

 

6. What are the issues related to these issues?

The main issue is a huge amount of money. If the SEC classifies Ethereum as a security, then its price will necessarily fall . Most exchanges in the United States are not registered as financial securities exchanges . Therefore, exchanges like Coinbase should remove the ETH from their listing.

7. When and how will this situation be clarified?

The appearance of ETFs and futures could help clarify the status of cryptocurrencies . The United States has chosen not to take an aggressive stance on cryptocurrencies. But, without clear rules the rules will be defined empirically, paying attention to the lawsuit and the penalties that will impose the authorities to the actors of the sector are judged to contravene the rules in place .

We have a paradox here : to know how to act, the actors of the cryptocurrency sector will have to act . They should act until they receive a warning or a sanction in order to know what to do next. Or stop their operations and observe their competitors and partners until they are sanctioned to determine the direction to follow.

In short, neither of these two options provides the legal certainty necessary for the development of the crypto-active ecosystem.