Blockchain Advocate Embraces Cryptocurrencies
The relationship between cryptocurrencies and the regulators of the financial world has been a confusing one. Debates have raged since the conception of cryptos surrounding how, if at all, the currencies might fall into the existing framework for regulation and scrutiny. The key arguments revolve around the definitions of key terms in the financial world, namely securities and stocks.
The classification of cryptocurrencies as viable stocks or securities would have major implications of the entire industry of cryptocurrency trading, and its impacts could extend to nearly every industry that cryptocurrency and blockchain technology has breached in the past few years. The categorization as a security would put the trade of cryptocurrencies under the regulatory jurisdiction of the Securities and Exchange Commission, a move which would create numerous obstacles for compliant organizations on the blockchain.
But it isn’t just the big exchanges that care about the classification that applies to the title of cryptocurrencies like Bitcoin or Ethereum. Holders of any cryptocurrency would be greatly affected by their classification as a regulated security. A litany of tax-related and filing concerns make the hoarding and trade of any security a difficult financial undertaking, and this problem is amplified in the cryptocurrency sector by the uniqueness of the assets that are regularly traded on the crypto markets.
Though numerous organizations have espoused their own opinions on how the new digital assets fit into existing regulatory frameworks and definitions, the SEC itself has been slow to make an official ruling, often contradicting previous statements made regarding the subject.
Coin Center Advocates
Coin Center is a financial organization known for its role in the advocacy of cryptocurrencies as fitting under the existing framework of securities regulation. They recently updated a 2016 report in which they argued that the currency might fit under its own regulators framework. The original report argued that a specific metric, known as the Howey Test, could be used by regulators to help determine whether or not a given cryptocurrency can be classified as a security.
The new update to the two year-old report expands on this idea, saying now that a variety of different cryptocurrencies currently in circulation could fall under the category as a “security,” effectively passing the Howey Test proposed in the previous edition of the report. Specifically, the report outlines three different components of the cryptocurrency equation are important in determining how the crypto might, or might not, fall under the category of a security.
This version of the report outlines that ICOs specifically need to be re-examined, especially given the changing landscape of the industry. Additionally, the report gives an in-depth introduction to alternative coins created using ICOs, as well as an explanation of how these new kinds of currencies might fit into the existing proposition for examining cryptocurrencies as potential security offerings.
Debate and Deliberation
It is unclear thus far how other financial authorities might respond to the Coin Center advocacy of the Howey Test for securities determinations in the cryptocurrency markets. But if the past tells us anything, there is no doubt that the report will stir up controversy and significant debate and discourse.