Digital currencies have baffled the world with their volatility and even governments and financial authorities around the world are unsure about what they should make of cryptocurrencies. In the US, the Securities and Exchange Commission (SEC) has had a tense relationship with these coins. The classification of these coins as securities or the creation of a new regulated asset class has puzzled the policymakers in the agency. New York-based firm BX3 Capital is now shedding light on what a draft regulatory framework could look like.
Taking Cues From William Hinman
The director of the Division of Corporate Finance at the US SEC, William Hinman, recently said that some degree of decentralization in the management of a token could make it fall outside the purview of a traditional security. While his perspective is considered a positive news by many, it still doesn’t clarify what the SEC really think about crypto coins. Could it be possible that there be a Regulation Crypto, along the lines of Regulation Crowdfunding and Regulation A+; regulations that essentially deal with small business capital-raising rules?
The mission statement of the SEC is “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The agency has previously warned users of the downsides of investing in crypto coins by using their own fake initial coin offering (ICO) for Howey Coin.
However, ICOs continue to raise billions of dollars. And since the beginning of 2018, they have collected $12 billion in funding. In the wake of this, it could be worthwhile for the agency to recognize this new asset class and create regulations that help protect the average investor.
Regulations Suggested by Bx3
Bx3 have suggested a similar approach to that proposed by the Thai SEC, where ICOs must first register with the SEC, and to that of a funding portal under Regulation Crowdfunding. This could help to provide protection against fraud and enable better regulatory oversight.
Just like an IPO, a company will have to register with the agency before raising funds and investors will also be subject to the standard AML and KYC norms followed in other financial instruments.
What SEC makes of these regulations and whether or not it takes the EU and Thailand’s regulations in consideration is still unclear.