BitOoda Regulatory Analysis, 9/28/20: Vision for Regulatory Clarity Will Help Compliant Firms Drive Institutional Engagement

Another huge week on the regulatory front! Of the three most significant developments this week — (1) the EU’s plan to develop a consolidated continent-wide digital asset framework, (2) the OCC’s interpretive letter clarifying that banks can provide services to stablecoin issuers, and (3) the introduction of two Congressional bills proposing a new national digital asset regulatory framework — the latter is the topic that we at BitOoda are most excited about.

The two complementary bills — the Digital Commodity Exchange Act (DCEA) and the Securities Clarity Act (SCA) — would offer the type of overarching but not overly-prescriptive framework that U.S. market participants have been calling for, providing clarity on the rules governing U.S. crypto exchanges, the respective roles of the SEC and CFTC and the accompanying clarity for token classification, and even proposing a method to combat price manipulation through market surveillance enabled by exchange-provided data.

As summarized by Coin Center’s Peter Van Valkenburgh, these bills would address three longstanding issues: “(1) the patchwork of state-by-state licensing of exchanges, (2) the limits of SEC jurisdiction, and (3) alleged price manipulation.“

Organizing and placing crypto exchanges under a common national framework while drawing a clearer line between SEC vs. CFTC (and therefore when tokens are a security vs. commodity) will position firms like BitOoda — with our strong, compliance-focused regulatory stack — to accelerate the migration of market activity to regulated platforms by working across agencies, assets, and jurisdictions under a clearer set of guidelines.

For example, BitOoda’s SEC-regulated Broker Dealer is approved to work with issuers on private placements of digital asset securities, which would be more clearly identified and classified under the SCA, as well as brokering SAFTs and other pre-sale agreements that would be better defined under these bills. Our CFTC-regulated Introducing Broker already is driving the growing volume of BTC Block trading on CME and other regulated venues, and will be able to broaden the market opportunities we can offer our clients with a bigger pool of CFTC-regulated platforms. Lastly, this type of clarity over asset classification (starting with the distinction between pre-sold tokens and investment contracts) will enable us to continue to drive the development of new and innovative product offerings such as the BitOoda BTC Hashpower Contract and BitOoda BTC Transaction Fee Swap.

We are extremely encouraged by the growing Congressional momentum behind efforts to modernize the country’s legislative framework for the digital economy, and are confident that this type of regulatory clarity will open the doors to growing institutional engagement in the space, enabled by firms who have positioned themselves for the evolution of regulated, fair, and orderly markets.