Although the round table of the SEC task group on Friday was a refreshing change in the “application regulation” approach of the previous administration, it focused on yesterday’s problems instead of proposals that could shape the regulatory framework that will govern cryptography in the future.
Since 1946, the question of whether a product is a “security” or “merchandise” has been governed by the decision of the Supreme Court in SEC v. WJ Howey CO. The courts have struggled to uniform the “Howey” evidence to digital assets, which should not be surprising because it is a decades on circles.
Digital assets do not fit cleanly in the “security” or “merchandise” cube. They are completely new. But the distinction between values and basic products is important according to the law because the SEC regulates the values and the CFTC regulates products that include basic products.
Congress is considering a new legislation that resembles the FIT21 bill of last year. This legislation will exceed the outdated Howey and abruptly define how private digital assets are classified.
The Round Table of Friday, which included a dozen prominent cryptographic lawyers along with the members of the CRPHTOGRAPHIC WORK GROUP of the SEC, should have served as a starting point for ideas and proposals that SEC could use as contributions to legislators who consider the new legislative framework for crypto. But, on the other hand, much of the discussion focused on debates of years on the four -parts Howey test and the philosophical discussions about the nature of the values.
Undoubtedly, some participants in the round table, such as the general advisor of A16Z, thousands Jennings, made important proposals, such as Jennings’s call to focus on economic reality instead of the legal relationship between the issuer and the investor. But much of the panel time was dedicated to discussing everything, from the use of Bitcoin in ransomware attacks to the recent orientation of the SEC personnel regarding memes coins. Between the SEC and the CFTC they will probably share the regulatory authority on digital assets in any new legislation, the line between the two regulators is very important for the crypto industry. The objective must be the creation of clear rules that emitters can follow to guarantee compliance, regardless of whether their token is considered a “security” or “merchandise.”
While the creation of Commissioner Hester Peirce of the Round Table applaud, along with its characteristic opening and transparency, Friday’s round table was a lost opportunity. He should have invited CFTC’s interim president, Caroline Pham, and her team to participate, or at least attend. The CFTC was not mentioned once during the round table, and cryptocurrencies need the SEC and CFTC to work together without problems in the coming years.
The Congress is advancing with his own answer to the question of when digital assets are values, whether the Sec decides to provide any opinion. For the sake of the cryptographic industry, I hope that the next round table of Commissioner Peirce focuses on promoting ideas that report the legislation that will shape the industry in the coming years.
