Crypto assets are just traditional assets but on the blockchain, a digital ledger. The key to figuring out which rules to apply is finding the right analogies: What about crypto is the equivalent of a security, what’s a commodity, what’s a collectible? What’s a broker, what’s a bank? Crypto entities sometimes blur these lines, playing prime brokerage and exchange and clearinghouse all at once without registering as any of the above — claiming that, because they’re like nothing regulators have seen before, they can’t be regulated without congressional action. So far, the dodge has mostly worked: SEC defenders blame the agency’s slowness to act on pressure from lawmakers to hold off enforcement until new laws are written. This can’t be allowed to continue.
Responsible agencies, from the SEC and CFTC to the Federal Trade Commission and Consumer Financial Protection Bureau, with or without congressional help, should develop guidance that draws clearer lines defining which of them has jurisdiction over novel products and their various attributes. Then they need to lay out what requirements apply — tweaking the rules they’ve written for the traditional financial system to fit the crypto realm where necessary. They should demand registration and go to court when companies refuse to come to the negotiating table.
‘Enforcement 40’ for 2020
Join Us On LinkedIn
Join the Securities Litigation and Enforcement Group on LinkedIn