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The tea leaves swirled Tuesday after Jay Clayton, president of the US Securities and Exchange Commission, let out hints of what US regulators will do (and will not do) in space crypto in the months and years to come.
Clayton gave a fireside conversation in front of a crowded room at CoinDesk's Consensus: Invest event in Manhattan yesterday afternoon. And while Clayton explained that he had thought a lot about cryptocurrency during the past year, there was still a lot to read between the lines, including his thoughts on the ecosystem of trade and the question to know when ICO derived tokens are considered securities.
Following the on-stage conversation, three long-time crypto-law experts dissected the nuances of what Clayton said when registering for CoinDesk Live (which you can look at below). Caitlin Long from the Wyoming Blockchain Coalition has joined us; Stephen Palley, Anderson Kill Law Firm; and Lewis Cohen, of DLx Law.
Although this group of experts addressed a wide range of issues, Clayton's discussions deserved to be highlighted. Here is what they said:
1. No bitcoin ETF as soon as possible
Perhaps first and foremost, it does not appear that the SEC approves any sooner a bitcoin exchange-traded fund.
"I know that there are many people who would like the ETF to be approved but I do not think it's very likely," said Long.
She pointed out that the third-party retention of cryptographic badets and market manipulation were two stumbling blocks for an exchange-traded fund.
In pre-trial detention, Long criticized the rule itself in these terms: "I think there's a real question of whether a depository is necessary if all badets are actually on a blockchain."
2. Regulated exchanges are necessary
Clayton explained very clearly that he did not trust existing cryptographic exchanges to prevent price manipulation.
The panel noted that Clayton appeared to imply that an initiative to introduce bitcoins on a regulated exchange was perhaps underway, with speakers highlighting remarks made earlier in the day by the chairman of the New Exchange. York, Jeff Sprecher.
But Cohen argued that bitcoin is a "wild beast" and that regulators may not understand how difficult it is to tame.
3. The rise of "CorpoCoin"
To better tame crypto, Clayton also said that money laundering protections should be in place for crypto trading.
Palley wondered what could be the consequences of this momentum for all retail investors who are active in the market today.
"My question is this," said Palley. "There is a lot of institutional money here. If you pay for it and monitor the market, will the retail interest remain the same?
Borrowing a term attributed to Andreas Antonopoulos, Long described this future as that of "CorpoCoin", adding:
"What will happen if it becomes too corporatized is that the crypto community is content to fend for itself."
4. Startups funded by ICO should go to SEC, ASAP
Repeating a theme that Clayton pointed out in his speech, Cohen argued that it would be up to crypto startups who raised funds in 2017 and early 2018 to turn to regulators.
Paraphrasing Clayton, Cohen said: "Those who come to us can get a deal, the ones we find to get another one."
Earlier this month, the SEC imposed its first civil penalties on two startups that failed to properly register their securities offerings. With these "models" in hand, said Palley, the SEC could be preparing to act much faster on ICOs.
5. No action on the letters "no action"
One of Clayton's messages on the scene was that the doors of the SEC are open to startups working in the industry, especially those who issue their own tokens. To this end, the agency has recently launched a new division focused on fintech with the explicit goal of fostering communication with ICO startups.
The panel agreed that what startups in this space want are "no action" letters (letters in which the SEC confirms that it will not move against a company based on its business model). .
The letters are long overdue, but no start-up has received any, according to Long.
"If that's what [Clayton] really wants, so that people come to receive letters of no action, the United States are already late and we are still late, "she said.
6. Courts can see ICOs differently
Although regulators are already there, there is another frontier for determining the validity of new funding mechanisms for blockchain startups.
As Palley asked: "What will the courts do when they badyze token sales?" In fact, this is already starting to happen.
Maybe in 10 years – or maybe even less – Palley said, the US Supreme Court might be interested in it.
Overall, Clayton said the SEC was happy to help crypto computer startups in the US find a way to comply with the law, but our panel of regulatory experts said that, in practice, this would prove much more effective. difficult (and expensive) that the President has sounded.
Click on the link below to watch the full CoinDesk LIVE panel:
Unpack Jay Clayton's remarks on #CoinDeskLIVE #ConsensusInvest https://t.co/YyiF2Ah2Qo
– CoinDesk (@coindesk) November 27, 2018
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