Crypto Asset classification a challenge: US Congress
At the US House of Agriculture Committee, the epithet for digital assets was simple- it complicated the ‘distinctions of the existing regulatory framework.’
In a US hearing on Wednesday, House of Agriculture Committee received observations of six witnesses, who concluded that the regulatory status of digital asset did not allow for clarity. Instead, the shift or transition from one context to the next only becomes blurred considering the fluid state of the crypto ecosystem.
The Congress Committee listened to the testimonies of Gary Gensler, a Goldman Sachs partner and former regulator at the US government, Scott Kupo managing partner Andreessen Horowitz, apart from Daniel Gorine, Amber Baldet, and Perkins Cole.
For two of the witnesses – Gensler and Fairfield, the digital token is a ‘pre-functional’ aspect. Initial Coin Offering and its sale were seen as a contract for investment. Security for the same was regulated by the SEC.
Another view proposed by the witnesses was that the crypto tokens could at any point of time fail to be securities since they were derived from the decentralized network and were regarded as utility token. This is true in the case of Ethereum, the crypto tokens felt. Digital asset even when monitored by the SEC , could eventually become a commodity in the context of Commodity Futures Trading Commission(CFTC).
The main issue in terms of CFTC monitoring is that it cannot always extend direct review and may result in overlooking the more important commodity market itself. It is more easily structured for the regulation of markets in the derivatives space, opined one of the witnesses, Gorfine, who recommended futures, as well as swaps markets, are better alternatives.
Further, Witness Gensler added that if the government were to consider ‘underlying cash-crypto markets,’ it could best be considered to be a ‘wild west situation,’ and CFTC will eventually have to consider authority as well as consider a range of other resources in order to overcome and breakthrough challenges.
In a separate study by the US House Subcommittee in May, it had concluded that the blockchain in supply chains, as a technology which would offer great scope for development of many other applications.
In an ongoing subcommittee hearing on digital currency and its future, the advocates of cryptocurrency propose that the Central banks should consider a common digital currency for easy regulation and access to the multiple advantages which blockchain technology can offer. The key task is before the government is to build a regulatory system which will allow for the natural processes of the coin and not is limited by other characteristics, such as easy exploitation by hackers.
Though the instances of criminals crypto-jacking these digital assets is a known factor, the members of the panel before this committee recommended that this sphere of risk should be considered as a part of the ecosystem. The panelist suggested that, just as crimes exist as part of any other industry, crime exist in the cryptocurrency industry as well.
The subcommittee hearing on digital currency is a comprehensive debate on the introduction of new digitized currency versus the role of the central banks in the financial system in the country.