Perhaps seeing that the law is going to come for crypto sooner or later, the industry has been rallying behind an effort to pass a new regulatory framework just for crypto—one that spares the full wrath of the Howey test. Companies, including Coinbase, have petitioned the SEC to issue new, digital-currency-specific rules. In the Senate, meanwhile, two different bills would transfer power from the SEC to the Commodity Futures Trading Commission, which is widely seen as lighter-touch and more industry-friendly. At any crypto conference, and in countless op-eds and congressional hearings, you can hear crypto executives and their supporters complaining about the injustice of “regulation by enforcement.” The government hasn’t given clear rules, they argue, leaving companies in the dark about how to proceed without getting sued.

“The regulatory landscape in the US is nebulous at best,” says Brandon Neal, the chief operating officer of Euler, a decentralized finance project. “It not only creates a lot of confusion in the industry and the public, but I think it potentially stifles innovation.”

To many securities law experts, however, there’s nothing nebulous about it. “You don’t run afoul of the SEC’s disclosure laws if you register and disclose,” says Roger Barton, managing partner of Barton LLP. “I believe the securities laws are clear enough. I don’t know that the SEC needs to create specific rules relative to crypto.”

It sounds intuitive that new technology requires new rules and regulations. But many securities lawyers believe the general approach exemplified by the Howey test is part of why US securities regulation has worked pretty well over the years. “The downside to providing clarity—and this is the reason we don’t define ‘fraud’ in the law either—is that as soon as you write down what the parameters are, you’ve given a road map for getting around it,” says Hilary Allen. “So the test needs to be flexible. The downside to that is there’s going to be some uncertainty in how it’s applied.”

Realistically, none of the bills in Congress are likely to become law any time soon, and the SEC isn’t going to cave and issue new rules. That leaves “regulation by enforcement” as the only item on the menu. No one can say exactly what will happen to the crypto industry if the SEC starts winning these big cases. The penalty for issuing an unregistered security can range from fines to criminal prosecution if fraud is involved. Perhaps most alarming for the industry, anyone who invested in something later deemed to be a security has the right to get their money back. That means crypto startups whose tokens have depreciated could be exposed to massive class-action lawsuits. Would-be crypto entrepreneurs, meanwhile, are likely to be deterred by the effort and expense involved in registering a security with the SEC.

“The disclosure requirement would raise the cost,” says Diamond, “and probably 80 to 90 percent of these projects would never have gotten off the ground.”

The industry largely seems to agree—hence its opposition. In a legal filing, Ripple argues, “To require XRP’s registration as a security is to impair its main utility. That utility depends on XRP’s near-instantaneous and seamless settlement in low-cost transactions.” More generally, opponents of the SEC’s approach say it will kill innovation and chase all the most talented crypto entrepreneurs to countries with more lax regimes.

Whether this would be good or bad ultimately hinges on some philosophical questions about crypto. If you think cryptocurrencies are a stupendous innovation that will unlock all kinds of hitherto impossible use cases, then you might think it’s crucial to craft a supple regulatory regime that helps the sector thrive at the expense of elaborate investor protections. If, on the other hand, you remain unconvinced that crypto has done anything but fuel a speculative asset bubble, you probably don’t think that. You might conclude, instead, that an industry that can’t exist if it must obey laws meant to protect investors is not an industry worth saving.

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