Attorney Rob Griffitts Shares Cryptocurrencies, ICO & SEC Legal Thoughts
Attorney Rob Griffitts Gives Interview About Cryptocurrencies, the SEC and Initial Coin Offerings
The truth is that the cryptocurrency market is far from being controlled or regulated. Several enterprises and companies are still operating in a legal system that is not developed around virtual currencies.
Jay Clayton, Chairman of the Securities and Exchange Commission (SEC), has recently commented about Bitcoin saying that it is not a security. But of course, there are also other digital assets in the market that need to be classified. What about Initial Coin Offerings (ICOs)? What about Ethereum and Ripple? Well about that, and more, Robert Griffin talked about with Bitsonline.
The first thing Griffitts mentioned was related to how the SEC would analyze and consider ICOs. If the token is being sold to raise money so as to build a network, for example, and the token will be used on it then it should be considered as a security. But if the network is built and buyers are not buying a venture that relies on the founders to ‘build the thing,’ then this should not be regulated by the SEC.
But there are also grey areas that need to be examined more carefully to decide whether or not an ICO token should be considered as security or not. Mr. Griffitts suggests to ICO founders to issue two tokens, one that works as an utility on the platform, and another that follows the securities laws.
He has also talked about Ether, because it is one of the most important virtual currencies in the market and because there was a lot of speculation whether the SEC could consider it as a security or not.
If the SEC considers that a token sold is a security and it was not registered as it should be, then that’s a crime under federal and state securities laws. This is something that investors could sue to have their money returned, and even ask for additional compensations and fees if they have been damaged.
Moreover, the SEC can sue as well for different causes including money damages. At the same time, the SEC can ask the court to impose injunctions and prohibiting future securities law violations.
If that happens, the issuer would have to shut its operations down. And those issuers that are selling to US residents are also subject to the same requirements as US issuers.
About the IRS, he mentioned that regulators will start to get its arms around blockchain and understand how to better approach to it. Protocols need to be adopted and new regulations need to be passed in order for this to happen, though. But he said that the IRS will rely on self-reporting and go to court when it thinks that it can make a case.
When asked about privacy currencies like PIVX, Monero or Zcash, Griffitts explained that there may not be an outright prohibition on their use, because that would raise some constitutional challenges. But it does not mean that there will be no efforts to regulate them.
About it he mentioned:
“I think it’s more likely we’ll see efforts to regulate them indirectly by imposing requirements on market participants, like money exchanges that buy or sell these coins, or accept them as payment, all in an effort to discourage their acceptance by the mass market.”
About the Venezuelan Petro, he mentioned that buying this coin means that the individual is financing the Venezuelan state which is sanctioned by the US government, and this would be a big problem.
At the same time, he believes that the SEC will one day require that securities be issued on the blockchain. Apparently there are two main reasons for it to happen, because the blockchain will have the regulation built in and because it will be easy to aduit. But for this to happen, it is important to see security tokens become a thing.
He has also explained that for companies to pay employees in cryptos it would be necessary to be compliant with the Fair Labor Standard Act. This Act requires companies to pay employees in ‘cash or negotiable instruments.’ And it is not clear whether the Department of Labor would consider cryptos to be negotiable instruments.
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