US House Hearing: Crypto Presents a Challenge Beyond Hard and Fast Asset Classifications

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US House Hearing: Crypto Presents a Challenge Beyond Hard and Fast Asset Classifications

Wed Jul 18, 2018 8:45 pm

Witnesses before the U.S. House of Agriculture Committee at a public hearing July 18 were unanimous in their view that digital assets complicate the hard and fast distinctions of existing regulatory frameworks.

The hearing was chaired by Texas U.S. Representative Michael Conaway, who convened six eminent witnesses to give testimony — former Goldman Sachs partner and U.S. government regulator Gary Gensler, Andreessen Horowitz managing partner Scott Kupor, the CFTC’s Daniel Gorfine, law professor Joshua Fairfield, Clovyr CEO Amber Baldet, and Perkins Coie managing partner Lowell Ness.

A key takeaway from the hearing was that a given digital asset may shift its regulatory status as it transitions from one context to another, given the fluidity of the crypto ecosystem.

Both Gensler and Fairfield argued that when a digital token is marketed at a “pre-functional” moment in its development — i.e. during an Initial Coin Offering (ICO) — then the sale is judged an investment contract and thus a security to be regulated by the Securities and Exchange Commission (SEC)

Critically, however, crypto tokens may cease to be securities once they become used in a decentralized network as a utility token as, for example, in the case of Ethereum (ETH). This means that a digital asset may at one point be an SEC-regulated security, only to later become a commodity of relevance to the Commodity Futures Trading Commission (CFTC).

As Gorfine outlined, the CFTC does not generally exercise direct oversight of the underlying commodity markets themselves, but rather regulates derivatives such as the futures or swaps markets.

https://cointelegraph.com/news/crypto-p ... ee-hearing

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