Bitcoin Global News (BGN)
October 17, 2018 -- ADVFN Crypto NewsWire -- Monday was not the
first time that a regulator claimed ICOs should be defined as
securities. It surely will not be the last, either.
On the other hand, we have also heard over and over, that
regulation stifles growth.
Gary Gensler’s comments that were published by Bloomberg this week
should be taken seriously, due to his background as the former head
of the Commodity Futures Trading Commission. In addition to this
fact, he has proclaimed the same notion, time and time again over
the last few months.
Even if you find yourself to be a Crypto believer who sees any sort
of serious attempt at regulating the space to be an unfair attempt
at pigeon holing a new technology, understanding the other side of
things is important. Could treating ICOs as securities possibly
help the future growth of the Cryptocurrency niche?
First, it is important to understand that Gensler does not seem to
think that all ICOs, past, present and future, should be placed
under an existing regulatory framework as securities. Contrary to
to what seems to be popular belief in discussions amongst
individualized Crypto investors, all regulators are not the
inherent enemy.
Gensler and others have been quoted as throwing their weight behind
the innovative potential of the Blockchain industry. In most cases,
however, it appears that the larger part of global government
agencies are in agreement on Gensler’s primary argument.
Crypto projects are thought of as securities when they end up
failing the Howey test. Despite this being the regulatory standard
for determining if an asset is a security or not, it can be argued
that the Howey test has its limitations.
As you may already know, failing it is based on meeting four
conditions, which are often phrased as questions. Is there an
investment of money? Is there an expectation of profit? Is the
investment of money in one specific business? Finally, does the
profit from the project come from any sort of third party, which
includes marketing firms who are hired to promote the
project?
According to the Coinist blog, essentially, if a team can prove
that their coin is a utility token and not explicitly meant for
profit, then it can avoid being labeled as a security. While this
is only one example from one source on how the existing regulatory
standard can fail, it is powerful in a sense.
A utility token can still be listed on Coinmarketcap as well as on
Crypto exchanges. Therefore, it can also be traded. If you are not
familiar with this phenomenon, just do a quick search for utility
token and look at what projects come up. Once you have done that,
then it is easy to see that a veritable horde of projects have
escaped regulators, at least in theory.
In the end, we can ask two simple questions: if the Howey test does
not work without fail, then what will? How can we come to an
agreement that satisfies both governments and Cryptocurrency, as
well as Blockchain professionals?
The answer might be that new regulatory frameworks need to be
made.
It might also be that the traditional frameworks need to fail at a
larger scale before this is done.
By: BGN Editorial Staff