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U.S. Prepares to Divide Cryptocurrency Industry Into Two Regulatory Domains

March 26, 2018


Congress is in the process of deciding which types of new legislation are required to augment regulator authority concerning, firstly, ICO capital formation and, secondly, cryptocurrency capital markets. A dividing line is being established between ICOs and digital commodities because the risks of public harm in each are different.

On the one hand, ICOs seem to require heavy-handed regulation. They are looked at by legislators and regulators as either incompetently-managed high-risk ventures offering little likelihood of the creation of a public good or, worse, outright scams designed to defraud investors.


On the other hand, established open source blockchain ventures that have created a system of peer-to-peer transfer of secure, scarce assets, like bitcoin and ether, are viewed as likely to create a public good. Those ventures may require only light-handed regulation that allows innovation to flower.


Chairpersons for both the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission) testified recently before committees in the U.S. Senate and the U.S. House of Representative exclusively on the subject of regulating cryptocurrencies from the standpoint of protecting investors while enabling American innovation and competitiveness. All previous hearings included a lot of talk about how to regulate cryptocurrencies with regard to money laundering and terrorist financing. This time, in what’s seen as a watershed moment for the cryptocurrency industry, two agency heads testified on both sides of the Capitol building about how to protect investors without stalling innovation.


The hearings seem to point to a future where strict regulation of token sales will be the SEC’s domain, while the CFTC will handle tokens once they are on an open blockchain and working in the real world. The CFTC will, for example, subpoena exchanges for records to police evidence of market manipulation or fraud at the spot market level.




By: BGN Editorial Staff

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