In a polished presentation, Coin Center’s executive director, Jerry Brito, and director of research, Peter Van Valkenburgh, told the audience about the regulatory happenings over the last year and upcoming challenges for cryptocurrency stakeholders.
Brito began by providing a recap of a few major accomplishments for Coin Center. These included the non-profit group’s work with the Uniform Law Commission (ULC) to create a model act for state money transmission licenses. One of the major barriers to widespread adoption is that regulation has occurred at the state level (e.g., New York’s BitLicense) rather than the federal level. As such, companies must adhere to a variety of compliance requirements rather than meeting an overall standard that applies in every state. In July 2017, the ULC approved a proposal for uniform regulation of cryptocurrency businesses. Although the act only required the endorsement of 20 jurisdictions, it received support from 45 out of 53.
Importantly, wallet providers, validators, state channels, and non-custody exchanges would not require a license, per the act. Additionally, the act would carve out some exemptions, including academic and personal use of cryptocurrency.
Next, Brito highlighted Coin Center’s work with the Blockchain Caucus on House Resolution (HR) 3708. HR 3708 would establish a de minimis cryptocurrency exemption of $600, meaning that transactions under this threshold would not be subject to taxation. He also briefly touched on the Securities and Exchange Commission’s (SEC) guidance regarding The DAO. This was not an enforcement action but, according to Brito, the SEC’s guidance encouraged statements from other regulators around the world. This included a token offering (ICO) warning by the United Kingdom’s Financial Conduct Authority.
Lastly, Brito mentioned concerns from politicians about terrorists potentially using cryptocurrency. As ETHNews previously reported, in June 2017, Brito testified before the House Financial Services Committee’s Terrorism and Illicit Finance subcommittee. From this hearing he surmised that legislators see a “serious potential threat” of terrorist financing via cryptocurrency, but have “only anecdotal evidence” of it happening. For now, Brito said, there is a greater focus on “fact-finding.”
In the second part of Coin Center’s presentation, Van Valkenburgh discussed regulatory “hotspots,” the biggest issues on the minds of cryptocurrency users: anti-money laundering regulation and securities law. Van Valkenburgh distilled each category into a set of two questions.
First, token issuers and users may wonder if a particular token is subject to anti-money laundering regulation. Van Valkenburgh suggested that stakeholders ask, “Is it being used as a currency substitute?” and “Is there a centralized issuer who can also withdraw from circulation?”
Second, with regard to securities regulation, Van Valkenburgh said that folks should ask themselves whether the digital asset is being sold as an investment and whether there’s a person on whom investors rely.
This last question was an obvious reference to The DAO.
Perhaps the most intriguing portion of Van Valkenburgh’s presentation was his depiction of the SEC’s regulatory interest. Displaying a graph with four quadrants, he suggested that the SEC should mostly focus on the intersection of investment and issuers.
Van Valkenburgh spoke of the “amorphous” nature of securities regulation. While token projects exist in each of these quadrants, that doesn’t mean that the SEC should be regulating all of them.