Latest on SEC “Regulation” of Cryptocurrency
December 13, 2021
Committee for Justice president Curt Levey writes at the Federalist Society blog about the “Latest Developments in SEC ‘Regulation’ of Cryptocurrency.” Here are some excerpts:
It was hoped that Gary Gensler, the SEC’s new chairman under President Biden, would revamp the agency’s approach to cryptocurrency. After all, Gensler had served as a senior advisor to the Digital Currency Initiative at the Massachusetts Institute of Technology’s Media Lab. Instead, Gensler has dismissed the regulatory uncertainty surrounding crypto, claiming this summer that “we’ve been awfully clear on a bunch of this stuff.”
As if to emphasize that claim, the SEC ended its lawsuit against Coinschedule (now Blotics) this July with a strong-armed settlement that went out of its way to avoid giving any clues about when a crypto token is a security. The SEC’s order tells us only that some of the 2,500 cryptocurrencies profiled on the once-popular Coinschedule website were securities.
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Legislation that would go a long way to fix the regulatory void has been introduced in Congress, including the bipartisan Token Taxonomy Act, which among other things would specify that cryptocurrencies are not securities and, most recently, the Clarity for Digital Tokens Act. Rep. Patrick McHenry (R-NC), the ranking member of the House Financial Services Committee, introduced the latter bill this fall. He explains that it would provide “a ‘safe harbor’ for startup digital asset projects, while maintaining important investor protections [in order to] provide much-needed legal clarity.”
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None of this is an argument that this nation’s financial regulators shouldn’t be allowed to go after genuinely bad actors, fraudsters, and scam artists. Instead, the point is that it’s neither fair nor efficient to treat innovators bringing new technologies and healthy competition like criminals, when they have neither notice that their activity is considered unlawful nor guidance on how to be in compliance.