Congressman Warren Davidson is to present “light touch” legislation on Initial Coin Offerings (ICO) within three weeks following a meeting between congressmen and crypto industry representatives. Davidson publicly said:
“Initial Coin Offerings have the potential to make capital accessible to more people and companies: lowering barriers to entry, eliminating intermediaries, improving security, protecting privacy, and actually increasing transparency. The potential is for everyone, not just tech…”
The legislation has not yet been prepared, with the meeting on Tuesday aimed at learning of the crypto industry concerns before drafting and introducing the bill.
The primary concern was SEC’s application of a century old securities law to ICOs, which does not easily fit an open source public blockchain based business model.
“Congress has to act because the SEC has said what they thought was right, and already did what they thought they needed to do,” Carla Carriveau, counsel at Circle, said.
SEC can only enforce the law, they can not make law, but this approach of regulation by enforcement is causing uncertainty, with Georgia Quinn, General Counsel of CoinList, stating:
“When you look at the cases being brought, they are the low-hanging fruit, it’s the scammers, the liars … It’s not giving me any primers on how to operate a business.”
The above concerns were echoed by more traditional companies, with David Forman, chief legal officer at Fidelity Investments, stating:
“If the rules are unclear, unwritten, or unknown it’s not appropriate to punish people for making the wrong guess.”
A number of attendants raised concerns that jurisdictional competition is now fierce, with US risking being left behind. “We need to get moving on this now, there’s no time for delay,” Congressman Tom Emmer said.
The bill may have bipartisan support in congress as the issues are not left or right with blockchain tech able to facilitate utopian communes just as much as hyper capitalist code based organizations.
The main issue is discrimination against anyone who is not a banker or very rich in their ability to invest and the lack of clarity on when exemptions apply which so far has only been vaguely defined as when the network is sufficiently decentralized.
“There needs to be some streamlining based on the definitions of digital assets,” congressman Darren Soto said before adding:
“I’m sensing we may need an entirely new category that treats this like a new asset, so that we’re not trying to squeeze a square peg into a round hole.”
This approach is what some of the industry has previously suggested, with one regulator overlooking cryptos just as stocks and commodities have their own different regulator.
Currently, the regulatory framework in US is so balkanized to the point a crypto entrepreneur may have to deal with SEC, CFTC, FinCen, state regulators, potentially OCC, and then of course all the other countries.
In addition, a crypto may start off being regulated by SEC, then may move to CFTC and potentially back to SEC, in an unclear manner.
A specific regulatory framework for cryptos, potentially with their own modern regulatory agency, may address all these problems, but what exactly will be proposed to congress in what may be an historic law, remains to be seen.