U.S. lawmakers met venture capital firms and entrepreneurs operating in the blockchain and cryptocurrency space this week, with the latter group cautioning watchdogs of the possible “brain-drain” if digital assets continue to be abided by 72-year-old regulations.
Industry Persons Call out Redundant Laws
As reported by CNBC on Sept. 26, over fifty industry participants met authorities on Sept. 25 demanding industry clarity and expedited legislative policies. The attendees warned Congress members of missing out on potential tax gains as the country’s crypto-businesses shift overseas in search of better policies and support.
Lawyer Joyce Lai, part of the legal department at blockchain incubator ConsenSys, believes the U.S. has enough time to build a market leader position, despite the immense competition from economies like Hong Kong, Singapore, and Malta.
While U.S. authorities are working towards issuing a blockchain-specific bill before 2019, industry persons call out against using the outdated “Howey’s Test,” a securities law dating back to 1946, for the cryptocurrency market.
Mike Lempres, chief legal and risk officer at Coinbase:
“It doesn’t have to be done in the same way it was done in the past, and we need to be open to that.”
SEC Laws “Misinterpreted”
Despite several attendees voicing concerns against the securities act, Security and Exchange Commision (SEC) chairman Jay Clayton hears none of that. The 52-year-old regulator had previously made clear that security laws will not be updated to fit demands from the crypto industry.
On the other hand, ICO companies at the conference stated their tokens should not be classified as securities at all – as most serve a function on their respective protocols and thus fall under the “utility” category.
Attendees warned Congress members of a “chilling effect” faced by U.S. companies if innovation continued to be clamped down by regulations and an absence of laws. In some cases, companies pointed out a misinterpretation of existing laws leading to several lawsuits and legal crackdowns.
The SEC has come down on a myriad of firms for breaking the law. While some were outright scams; several firms have been prosecuted for much milder offenses, such as failing to register their business with the agency.
ICOs have faced much of the brunt from crackdowns. While the fundraising method has resulted in hundreds of billions of dollars raised from retail investors, the lack of working products and substantial blockchain usage lends reason to the SEC’s decision.
Expressing his views on ICO financing in the U.S, Jesse Powell, CEO of crypto exchange Kraken, stated:
“Foreign companies are able to outraise their U.S. competitors and often whoever raises the most money is who wins. Not only are U.S. companies not able to raise enough to compete globally, but U.S. investors also are not able to invest in these global companies.”
After four hours of discussions and listening to industry views, the panel agreed that cryptocurrency regulations were to be swiftly created as legitimate parties faced unnecessary obstacles due to the lack of certainty.
Meanwhile, the present Republicans were rather forward-thinking in their views and suggested that Congress “may need to throw out the current playbook” for the multi-billion dollar cryptocurrency sector.
Cover Photo by Max Sulik on Unsplash