In its letter to SEC Chairman Jay Clayton, fifteen Congress members have recommended that the SEC issue clear formal guidance on when the offer and sale of digital tokens constitutes “investment contracts” under the Howey Test. Up until now, the SEC has only been clarifying its position on cryptocurrency sales through enforcement actions. This has led to a great deal of regulatory uncertainty, which often hinders the innovation that this type of technology provides. Ironically, Congress itself could pass legislation that clarifies when digital token sales are considered securities under the Securities Act of 1933. However, because securities law is such a specialized and complex field, it is no surprise that Congress is deferring to the SEC on this matter.
At a cryptocurrency conference in San Francisco, Former President Clinton spoke about how over-regulating technological innovations like blockchain could ruin blockchain itself. His concerns echo those of many others who think that lawmakers should implement cautious and well-reasoned regulation instead of simply applying old laws to new technology or rushing to regulate. Clinton’s message also brings to the forefront a debate about the effects of regulating new technology: Does regulating firms implementing blockchain slow down innovation? Or does regulation add legitimacy and legal certainty to technology, thus allowing for more access to capital markets?
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