As 2020 comes to a close, it is a good time to review the regulatory landscape for crypto assets in the U.S. and provide suggestions to the Joe Biden administration that will be arriving in January 2021. Our advice would be to emphasize clarity, consistency and more collaboration across regulatory agencies.
The biggest impact on crypto policy in the U.S. during the next four years will come from federal agencies – and the regulators staffing them – that are responsible for overseeing our financial system. As with all administration transitions, key appointments to prominent roles in agencies such as the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are expected to be made in the upcoming months. The CFTC’s head, Heath Tarbert, announced last week that he is leaving early next year, for instance.
Donna Redel is the former chairman of COMEX, a board member of New York Angels and an adjunct professor of law at Fordham Law School. Olta Andoni is an attorney at Zlatkin Wong, LLP and an adjunct professor of law at Chicago-Kent, College of Law.
Crypto’s speed of innovation continues to outpace regulatory adoption and/or adaption. Hence, flexible, principles-based regulation, such as the approach taken by the CFTC, would create less friction at the intersection of innovation and technology. Regulators walk a tightrope between balancing the need to protect retail inventors as well as the integrity of markets while simultaneously trying to foster innovation and business growth, especially for startups.
Let’s summarize where regulation stands right now.
Securities law clarity
We have not received substantial additional clarity from the SEC following its publication of its Framework for Digital Assets (April 2019) which has left many unanswered questions and raised new ones. For example, we are not clear on who or what is, or is not, an “Active Participant,” and how one applies the Howey Test to the decentralized…