Recently, more than a dozen members of congress sent a letter to the chairman of the Securities and Exchange Commission (SEC) Jay Clayton, asking the agency to present a clear picture of how it views cryptocurrencies and other digital assets.
CNBC reports that Reps. Ted Budd, R-N.C. Darren Soto, D-Fla, David Schweikert, R-Ariz., Jeff Duncan, R- S.C., Alex Mooney, R- W.V., John Curtis, R-Utah, Ralph Norman, R- S.C., Andy Biggs, R-Ariz., Mark Meadows, R-N.C., Derek Kilmer, D-Wash., Greg Gianforte, R-Mont., and Sean Duffy, R-WI, were among the signatories.
Joining Voices With Crypto Investors
While crypto investors have long called for the SEC to be more forthcoming about its regulatory stance on the crypto market and ICOs, this letter marks the first time that a sizeable power bloc within the government has publicly sided with crypto investors in their quest to lobby for a clearly defined and non-punitive regulatory environment.
In the letter, the congressmen urged the SEC to see itself as part of a wider regulatory system that needs to work in harmony so as to develop clear guidelines and avoid creating uncertain conditions that can lead to capital flight.
CryptoGlobe reported earlier that the SEC has publicly stated it considers the majority of ICOs to be security sales, a position that has spooked crypto traders and investors as it potentially opens them up to legal action on account of non-compliance with the commission’s ‘Reg D’ reporting standards.
Clayton has indicated it is not his intention to push for any rule changes to accommodate cryptos, given that the SEC does not have the power to change laws without an act of Congress, The letter presents the clearest indication yet this may not be far off from happening. A week ago, CryptoGlobe reported that Rep. Tom Emmer, R-Minn introduced three bills for reading, that were intended to support cryptocurrencies and blockchain technology.
Today’s letter stressed that crypto industry stakeholders are worried the SEC’s perceived use of prohibition and punishment as its first line of regulation will lead to large scale crypto capital flight from the United States to friendlier jurisdictions like Malta and Singapore.
Expressing this fear the letter said:
Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere. We believe that the SEC could do more to clarify its position [...] We are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.
No deadline was given for the agency to respond to the concerns and questions raised, but the SEC was urged to "be mindful of the speed at which the industry is developing."
Specific Requests From Congress
In the letter, the congress members specifically requested that the SEC clarify what criteria are used to determine whether ICOs are security sales or utility token sales. At a time in which this issue is raising considerable amounts of dust around cryptocurrencies like XRP, this is one of the key regulatory questions anging over the entire crypto industry in the United States.
An excerpt from the letter reads:
The public statements made by yourself, Commissioner Peirce, and Director Hinman are helpful indicia of the evolution of the SEC's views of digital token platforms. Please expand on what criteria the SEC is currently using - specific to digital tokens- to determine under what circumstances the offer and sale of a digital token should properly be considered an "investment contract," and therefore, and offer or sale of "securities" under the Securities Acts and the Howey Test.
The letter further requested “specific FAQ-type examples” illustrating how investors may be able to interpret the criteria in a practical setting, so as to help the market gain a better understanding of the commission’s standpoint.
The SEC chairman was then asked to clarify whether the SEC agrees that it is possible for a token sold in an investment contract to be a non-security that can be analysed separately from its original purchase agreement.