BitOoda Weekly Regulatory Report, 4/8/2019: Moving Beyond the “Do No Harm” Approach
Typically, we at BitOoda try to avoid repeating the same news that our clients probably have already read in all the other crypto newsletters. We will make an exception this week, given the milestone SEC announcements offering a framework for assessing whether a digital asset is a security and granting no-action relief on the non-registration of TurnKey Jet’s proposed token.
The timing of these announcements is significant for the industry (and as Coin Center noted, the content is almost less important than the clarity and overall message), as volumes and prices are steadily bringing us further away from Crypto Winter. In our view, this is a much-needed indicator that regulators are intending to work toward the eventual establishment of a structure that could actually promote market growth, innovation, and the development of a financial infrastructure that will encourage broader adoption and investment. We at BitOoda, like many other leading crypto firms in the space, are in the thick of crafting new strategies and forming partnerships across verticals to apply digital asset activity to traditional market structures and processes, and our view is that this type of regulatory effort certainly helps clarify the SEC’s thinking on certain issues, and at worst energizes the ongoing dialogue between regulators and industry.
That said, as other commentators have noted, this new SEC framework is by no means the comprehensive set of guidelines needed to address the range of regulatory uncertainties. The Commission explicitly notes that this is not an official rule or regulation, and the framework serves largely to reinforce and remind us that the Howey Test remains the basis for the SEC’s thinking about digital asset governance. Two of the biggest questions left unanswered — the practical definition of “active participant,” and when and how a token might transition from security to commodity — highlight that there is still a long way to go to achieve a truly effective regulatory structure in the U.S., particularly as we wait to see how strictly the SEC applies the conditions and restrictions laid out in the no-action letter, as well as the implications for utility token projects.
Along these lines, BitOoda is pleased to announce the publication of our new White Paper titled “The Growing Harm of the ‘Do No Harm’ Approach: Drawing on International Examples to Inform U.S. Digital Asset Regulatory Reform.” The paper reviews the state of digital asset regulation, addresses the shortfalls of the approach taken by U.S. federal agencies to date, identifies the areas where regulatory clarity is most needed, and draws on global precedents to inform a new U.S. framework. The piece takes a global look at the regulatory environment, and anticipates the study called for in draft congressional legislation: the proposed Virtual Currency Market and Regulatory Competitiveness Act would require the CFTC to produce a report comparing U.S. and international regulation of virtual currency, and proposing ways to improve federal agencies’ ability to promote U.S. competitiveness.
Given BitOoda’s growing leadership and success in developing pioneering solutions for trading, brokering, and managing digital assets, we are pleased to expand our efforts in the regulatory realm and further supplement our key role in the Association for Digital Asset Markets (ADAM). We welcome inquiries and comments on the paper.