US Crypto Industry, Wall Street Urge Congress for Regulatory Clarity

The US could find itself falling behind if the authorities do not take action to end the legal uncertainty around cryptocurrency, financial industry executives stated during a roundtable in Washington this week.

More than fifty representatives of US cryptocurrency and Wall Street companies have called on Congress to step in the cryptocurrency, blockchain, and Initial Coin Offering (ICO) markets and bring clarity to regulatory practices. These appeals were the main results of Tuesday’s virtual coin discussion on Capitol Hill.

Representative Warren Davidson (R-Ohio) organized the Tuesday’s roundtable, called “Legislating Certainty for Cryptocurrencies”. Davidson, who plans to submit virtual coin bills soon, wanted to hear different opinions on how cryptocurrency and distributed ledger technology (DLT) should be overseen.

Cryptocurrency companies are more afraid of the existing unclear situation than they are of regulation, as the uncertainty leaves questions as to how the US authorities treat virtual coins and blockchain, several crypto representatives explained.

One of the significant problems is whether cryptos are securities and regulated by the Securities and Exchange Commission (SEC), commodities under the supervision of  Commodity Futures Trading Commission (CFTC), or should be covered by new definitions and rules, some of the panel’s participants outlined.

Tokens issued during Initial Coin Offerings (ICOs) are not securities, according to Hilary Kivitz, chief operating officer and general counsel at Andreessen Horowitz venture fund. Kivitz’ opinion is in direct contradiction to SEC Chairman Jay Clayton’s message from February that every ICO he had seen was a security.

Commenting on the various opinions, David Forman, a chief legal officer at Fidelity Investments said:

“If the rules are unclear, unwritten, or unknown it's not appropriate to punish people for making the wrong guess.”

Mike Lempres, chief legal and risk officer at Coinbase, explained that new measures are more appropriate as currently, the SEC uses the 1946 Howey Test when deciding if one asset is under the scope of federal securities laws.

“We all want fair and orderly markets, we want all the same things regulators do. 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.”

Coinbase’s competitor Kraken warned that the lack of clear rules creates market disadvantages for US companies as business and investors are not sure if it is lawful to invest in digital currencies, including in the cryptocurrency crowdfunding model of ICOs.

“Foreign companies are able to outraise their U.S. competitors and often whoever raises the most money is who wins,” Jesse Powell, co-founder and chief executive officer (CEO) of Kraken said.

Representative Davidson praised crypto and Wall Street companies for their willingness for cooperation with authorities.

 “I'm confident we can move forward and make this [crypto] a flourishing market in the U.S. It is imperative for us to do, we did it well with the internet,” Davidson said.

Several months ago, SEC Chairman Jay Clayton said that he was against changing existing rules for favoring cryptocurrency and ICO models.