University of Arkansas Law Professor: Crypto Regulatory Confusion is Complicating the Bitcoin Space
Carol Goforth is a teacher at the University of Arkansas School of Law, and she recently reached a fair conclusion about what regulation is doing to cryptocurrency in the market. As she puts it, the
“overlapping regulations produced by a multitude of distinct agencies with different missions and priorities” has caused a “confusing mix of classification and requirements”
for crypto assets.
To explain her perspective, Goforth brings to light the four entities that should be handling these regulatory concerns right now to some degree. Those entities include – the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Internal Revenue Service (IRS).
Still, each of the authorities have different ways that they define the assets, and this alone is a major catalyst for the confusion in the first place. The SEC for instance, says that the new creation of digital assets makes them securities, while the CFTC specifically says that crypto assets are considered commodities, regardless of their newness or source. The IRS has a similar view to the CFTC, except crypto is considered property, rather than a commodity.
FinCEN is in charge of regulating the crypto exchanges in the same way as traditional monies, which implies that crypto assets are currency in the eyes of the U.S. Department of the Treasury.
With so many definitions by the different federal agencies, overregulation is a big problem. The ability to meet the requirements of all four entities is almost impossible, and it becomes more expensive and time consuming than actually running the daily operations of the businesses. At the state level, these issues are amplified by the fact that there are varying securities laws and taxes applied.
Right now, there are a few states that say that cryptocurrency should be an exception for securities laws, though it’s possible that their decisions were simply made in an effort to avoid the hassle.
Deciding collectively on a regulatory approach would be a much simpler way to handle cryptocurrency and would ultimately stop the industry from overregulation. So far, the current regulations in place have limited the U.S.-based crypto exchanges in what they can let their clients use, like Coinbase.
However, the regulations in the United States has also made ICOs difficult to pursue, leading some projects to leave the U.S. completely out of the loop, opting to focus on Singapore, the Virgin Islands, and the Cayman Islands, based on a report by the Satis Group Crypto Research.