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In the legislative proposals for the 117th Congress in 2021-2022 on the official website of the U.S. Congress, the HR1602 proposal initiated by the House of Representatives on March 8, "Directing the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to jointly establish a digital asset working group and discuss other matters," has attracted the attention of the crypto industry. The bill clarifies when cryptocurrencies are securities regulated by the SEC and when they are commodities regulated by the CFTC. It also addresses how cryptocurrency custody, private key management, and network security are currently treated in accordance with the law, as well as future best practices for fraud prevention, investor protection, and other issues. It also proposes feasible suggestions for improving primary and secondary digital asset markets, including their "fairness, orderliness, integrity, efficiency, transparency, availability, and effectiveness."
Alan, chief researcher of Binance China Blockchain Research Institute, analyzed to the researcher of China Times Financial Research Institute that SEC and CFTC are the most authoritative regulatory agencies in the US financial industry, and the US Congress's joint discussion of the cryptocurrency bill with SEC and CFTC also represents the importance that US government agencies attach to the cryptocurrency industry. Although the United States has the most complete cryptocurrency compliance in the world, the entire industry can be said to be still in its early and wild stages, and many unregulated laws and regulations have hindered the involvement of most traditional financial investors.
CFTC, SEC and Congress discuss digital asset bill <br />Recently, U.S. Congressmen Patrick McHenry, Stephen Lynch and others proposed a proposed crypto asset bill called the "Removing Barriers to Innovation Act of 2021" (hereinafter referred to as the "Bill"). According to the provisions of the bill, Congress will invite the CFTC, SEC and industry experts to jointly establish a digital asset working group around the bill to discuss and confirm the establishment of a crypto asset working group within 90 days after the bill is passed, and evaluate the current legal and regulatory framework for digital assets in the United States.
The non-governmental experts invited will come from financial technology companies, financial services institutions and representatives of small businesses that use financial technology, as well as representatives of investor protection groups and at least one academic research representative.
Amy Davine Kim, chief policy officer of the U.S. Chamber of Digital Commerce, said the legislation aims to establish an organized and comprehensive regulatory framework for digital assets in the U.S. "The SEC and CFTC have officially joined forces to jointly address some key issues that have affected legal transparency for many years, and now we have the opportunity to work with some stakeholders to address these issues in a systematic way," Kim said.
According to the introduction of the bill, its goal will be to define when the SEC has jurisdiction over a particular token or cryptocurrency (i.e., when it is a security) and when the CFTC has jurisdiction (i.e., when it is a commodity). SEC Commissioner Hester Peirce said that the United States generally lacks regulation on this, and there is no clear law to stipulate when a certain cryptocurrency is considered a security. The SEC's enforcement actions provide a lot of guidance in this regard.
"Since cryptocurrency is an emerging asset class, this bill is intended to confirm the position of the SEC, CFTC and the U.S. Congress in regulating cryptocurrencies. However, the ultimate goal behind this is to seek consensus among various parties and institutions on cryptocurrency. However, it does mention the need for a wider range of corporate representatives, and can also represent the demands and feedback of crypto companies to a certain extent, but compared to the government, their opinions should be secondary." Roy, a senior crypto practitioner, analyzed to a researcher at the China Times Financial Research Institute that of course, the research on this bill can be said to be a good thing for crypto companies in a sense. Now this government agency says that cryptocurrency is a security, that agency says it is a commodity, and the crypto companies themselves believe it is a currency. With so many different opinions, the development of cryptocurrency will definitely be hindered in the future.
It is reported that the digital asset working group is required to submit a report within one year. In addition to addressing the above issues, the report will also analyze the current encryption regulations in the United States and the impact of these regulations on the primary and secondary markets.
Zhu Youping, deputy director of the China Economic Net Management Center of the China National Information Center, told a researcher at the China Times Financial Research Institute that how to define cryptocurrency or tokens is a difficult problem, as they have both commodity and security attributes. In the United States, if it is identified as a commodity, private digital currency can be released; if it is identified as a security and is not reported as a security, the relevant company is likely to be investigated by the SEC.
At the end of December 2020, Brad Garlinghouse, CEO of the US crypto company Ripple, said in an interview with Fortune magazine that the US Securities and Exchange Commission (SEC) will file a lawsuit against Ripple for selling unlicensed securities. To this day, the lawsuit is still ongoing. Recently, several US crypto companies have been sued for failing to meet the regulatory requirements of the SEC or CFTC.
Several US crypto companies have been charged <br />In recent years, in addition to Ripple, several US crypto companies have been charged for suspected illegal sales of securities; the SEC has also investigated a large number of ICOs in the past few years. After the above-mentioned bill is clarified, crypto companies will make rectifications in accordance with the bill. With laws to follow and the wilderness to be broken, this accusation may be reduced in the future.
Alan believes that from the perspective of industry practitioners, this discussion on the bill will play a driving role in the entire industry. Looking at the development of the entire financial market, legal supervision is a prerequisite for a mature and vigorous market. On the one hand, the launch of compliance licenses or cryptocurrency compliance ETFs and other products is what financial institutions expect to see, which has positive significance for the construction of cryptocurrency basic products, the promotion of new users, and even the entire industry. At the same time, the security of users' assets is guaranteed by compliance. Therefore, even if the subsequent formulation of the bill suppresses the current cryptocurrency industry, it will have a positive development effect on the industry in the long run.
For example, in early March, the U.S. Department of Justice (DoJ) issued a statement saying that John McAfee is facing a number of different criminal charges. The Department of Justice accused McAfee of commodity and securities fraud, securities and peddling fraud, substantial wire fraud, and money laundering. In addition, there are tax evasion and suspected initial coin offering (ICO) fraud. In addition to the charges of the U.S. Department of Justice, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also filed civil charges against McAfee and.
John McAfee is a well-known cryptocurrency advocate and founder of McAfee, an Internet virus defense app. He has previously publicly stated that he would run for president of the United States. In 2019, McAfee fled the United States after being charged and was arrested in Spain in October 2020. McAfee is currently in prison in Spain. The U.S. Department of Justice believes that McAfee and his accomplices allegedly used their Twitter account to sell various cryptocurrencies to hundreds of Twitter followers through false and misleading statements, earning more than $13 million.
In 2020, the SEC's allegations of fraud and illegal registration of securities by Boon.Tech also attracted much attention. According to the SEC's allegations, from November 2017 to January 2018, Boon.Tech and its CEO Pavithran raised approximately $5 million by selling Boon tokens to more than 1,500 investors in the United States and around the world to develop and market a platform that connects employers who post jobs with freelancers looking for work. The SEC's allegations allege that Boon tokens are securities, saying that the project and its CEO sold Boon tokens as investments without registration.
The SEC said Pavithran and Boon.Tech made false and misleading claims, such as claiming that Boon tokens were stable and secure because Boon.Tech's platform stated that it was applying for patented technology for Boon tokens to eliminate the volatility inherent in the digital asset market, but in fact Boon.Tech did not apply for the patented technology. In the end, the two parties reached a settlement with Boon.Tech promising to pay a fine of $600,334 and return $5 million in profits.
The SEC requires the company to destroy all Boon tokens, remove Boon tokens from all third-party digital asset trading platforms, and prohibit it from participating in any future issuance of digital asset securities. It also punishes Pavithran to pay $150,000 and prohibits him from serving as a senior executive or director of a public company.
In the previous SEC lawsuit against Telegram, Telegram was required to return the $1.2 billion ICO funds raised through GRAM tokens to investors.
New York Attorney General Letitia James, who just concluded "Bitfinex and Tether's illegal activities in New York," advises members and investors in the cryptocurrency industry to remain vigilant and not to participate in illegal activities or become victims of illegal activities. "Be extremely cautious when investing in virtual currencies," "Cryptocurrencies are high-risk, unstable investments that can result in devastating losses," James warned. Under current New York State law, all cryptocurrency brokers, traders, salespeople, and investment advisors doing business in the state must register with the Investor Protection Bureau of the New York Attorney General's Office, otherwise they will be subject to civil and criminal penalties. (Huaxia Times) |
