Seeking exemptions from federal oversight that they believe will slow growth of the cryptocurrency space, industry groups are forming in attempts to lobby agencies like the Securities and Exchange Commission (SEC) for limited interference. The groups are worried that policies in Washington could slow the innovation of blockchain-based technologies that underpin cryptocurrencies, as well as the coins themselves, according to people familiar with the matter.
Fighting Back Against Over-Regulation
As we know, regulation in the U.S. is murky at present and there’s a lot of overlap. The SEC claims that digital coins issued by startups are investments, and therefore should be regulated as securities, subjecting the firms to extensive federal oversight. The industry also faces opposition from the Commodity Futures Trading Commission (CTFC) and traditional banking regulators who attempt to police payment systems and enforce anti-money-laundering laws.
In attempts to fight what they see as potential over-regulation, the industry has hired top political and legal talent to lobby for voluntary standards and sing the praises of blockchain.
“You can’t just put your head in the sand and wish away government oversight,” said Jason Weinstein, a partner who works on cryptocurrency-related issues at the law firm Steptoe & Johnson LLP.
Of note here is that Weinstein is a former senior Justice Department official, who now serves on the advisory boards of industry advocates Coin Center and the Chamber of Digital Commerce. The groups have filled their boards with other former government regulators, too, including former CFTC Chairman Jim Newsome, former SEC member Paul Atkins, and former CFTC Commissioner Mark Wetjen.
Meetings With the SEC
The meetings on March 28th with the SEC were attended by Andreessen partner Scott Kupor and general counsel Ryan Ward, Union Square’s Brad Burnham and John Buttrick, and lawyers from Cooley LLP, Perkins Coie LLP, and McDermott Will & Emery LLP, as well as a lobbyist from the National Venture Capital Association.
The group met with top officials of the SEC’s Division of Corporation Finance, which regulates initial coin offerings (ICOs), as well as the offices of a few SEC commissioners, according to the Wall Street Journal.
According to people familiar with the matter, the group was looking for assurance from regulators that their products would be exempt from SEC oversight. They argued that tokens aren’t investments, but instead products that can be used to access services or networks provided by startup companies, people familiar with the meeting said.
If the SEC were to change their perspective, it would allow startups to sell tokens broadly to investors without having to provide regulated disclosures like financial statements and detailed descriptions of their businesses. The group said it wouldn’t object to the SEC intervening if a token issuer committed fraud, the people said.
Unfortunately, SEC officials have privately expressed skepticism about granting such a broad exemption, the people said. What’s more likely is that the agency will offer a limited exemption from oversight if a company’s token sale is capped at a per-investor limit and can’t be resold at a profit to third parties, the report stated.
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