Last week, SEC Chairman Jay Clayton declared, in no uncertain terms, that while he does not consider cryptocurrencies like bitcoin to be securities he is not going to adapt existing regulations to accommodate the rise of “utility tokens” or tokens claiming not to be traditional securities. For several months, the blockchain industry has yearned for formal guidance from the SEC regarding how it approaches assets like utility tokens amidst the ICO boom that has gripped the market for the better part of the past year and a half. Yet as Chairman Clayton noted during his interview last week, he’s not going to get much clearer than this. As long as Chairman Clayton is at the SEC, they are going to enforce securities regulations according to the same regulations that have guided them for the better part of the past 90 years. And that’s exactly the stance they should take.
A Fair Interpretation
As a company operating in the blockchain industry, it’s easy for us to react to Chairman Clayton’s line in the sand as an affront to innovation. Based on prior interviews and public statements, we know that Chairman Clayton is not the biggest fan of cryptocurrencies in general. But that doesn’t mean he hasn’t been fair and consistent in his enforcement and interpretation of existing securities regulations. The SEC has been quite clear for awhile now that utility tokens, and other digital assets which can be reasonably interpreted as securities according to the Howey Test, will be treated like traditional securities and subject to the same enforcement.
Individuals and Institutions Leading Change
As CoinCenter Director of Research Peter Van Valkenburgh highlighted on Twitter this week, it’s not Chairman Clayton’s job to change the regulatory landscape! If the blockchain industry wants to see existing regulations adapted to better accommodate the unique features of their projects, it needs to direct its energies towards the courts and legislators who create the laws and precedents in the first place. The SEC is an enforcement agency, and in this role it will always take its regulatory lead from those creating the laws of the land in the first place. If the industry wants to see regulatory change that it feels will treat blockchain-based projects more fairly, it needs to start thinking more deeply about the individuals and institutions that are going to lead that change- rather than expecting Chairman Clayton to be their regulatory saviour.
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