For years, the U.S. financial markets have thrived as some of the most innovative globally, due in part to balanced and clear legal systems. These include regulations for capital markets, enforced by bodies such as the U.S. Securities and Exchange Commission (SEC).
Historically, the SEC has enabled new financial innovations, including exchange-traded funds (ETFs), money market funds and equity-linked derivatives, by applying clear, well-defined rules. These regulations have allowed American capital markets to remain leaders in global financial innovation.
However, crypto represents a significant departure from traditional assets. Most cryptocurrency tokens differ greatly from conventional securities, as they often don’t involve contracts, claims on an issuer’s assets, or ownership stakes. Trying to apply the Securities Exchange Act of 1934 and past court decisions such as the Howey ruling to most crypto tokens is a stretch.
However, the majority of cryptocurrency tokens, according to SEC chair, Gary Gensler, are securities, meaning that the SEC has authority over them, their issuers and the exchanges where they are exchanged.
Despite his stance, Gensler has yet to clarify how he arrived at this conclusion. While he agrees that Bitcoin is not a security, he hasn’t explained how it differs from other crypto tokens in terms of regulation. To add to the complexity, the SEC has claimed oversight of cryptocurrency trading and issuance but has yet to develop new rules to address these activities. Rather than providing clear guidance, the SEC has chosen to regulate through enforcement actions. This approach has stifled growth in the U.S. crypto industry, leading many blockchain developers to move overseas where regulations are clearer.
As U.S. companies battle the SEC in court, it may take years before the legal system decides how to apply decades-old securities laws to modern technology. Meanwhile, the U.S. risks losing its leadership position in one of the most important financial innovations of this generation.
Congress is in a better position than the courts to address this issue. Courts are not well-suited to develop intricate regulatory frameworks, but Congress can weigh different policy options and is directly accountable to voters.
Fortunately, progress is being made. Congress has already begun working on a legislative framework for regulating cryptocurrency, including stablecoins, a specific type of crypto asset that requires tailored rules. Several bipartisan lawmakers have introduced bills that could significantly clarify the regulatory landscape for cryptocurrencies.
Although some in the Biden administration and a few Democratic senators have slowed the process, momentum is building. The House recently passed FIT 21, a measure that seeks to define the boundaries between commodities and securities regulations.
As political dynamics evolve, there is hope that Congress will use the remaining legislative time to pass cryptocurrency regulations that help the United States maintain its standing as the most progressive financial center in the world. The industry, including entities such as Canaan Inc. (NASDAQ: CAN), would be glad that they finally have a regulatory system that they can base upon in all they do.
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- Source: https://www.cryptocurrencywire.com/crypto-expert-calls-for-congressional-action-to-steer-industry-forward/
