The States will probably carry on passing legislation to promote the usage of distributed ledger tech for reasons that go over securities and cryptocurrencies.
The ongoing situation with distributed ledger innovations in the U.S. is a story of two instrument categories. In one corner, we have the SEC’s slow-moving to accept distributed-ledger-founded securities, which brought that industry to nearly a halt. In the other cornet, bank regulators, cash transfers, and commodity spaces are shown will to cooperate with distributed leverage firms to allow the provision of assets and asset classes in those places. This led to non-securities distributed-leverage-founded instruments and firms to gain a lot lately.
A substantial time after the ICO rush, the Securities and Exchange Commission and the FINRA went on to acting sheepish about adopting such instrument categories. FINRA approved just a handful of cryptocurrency brokerage dealers and their applications. Even with retail demand and myriad bids, the SEC still has to say yes to a BTC exchange-traded fund, stating worries concerning marketplace manipulation, all the time sustaining moves to conduct the allocation of tokens it sees at securities, like in the cases of Telegram and Kik.
This led to activities in the area of blockchain-founded securities being restored. For instance, in July 2019, the Securities and Exchange Commission approved Blockstack’s provision of Stacks tokens citing Tier 2 of Regulation A. Yet, for those wanting to buy in the States, there is still no approved exchange or another way for trading. There is no space for buying, selling, and trading the tokens. We can also look at tZero, which runs an alternative trading system that does security token trading. Despite them having permission to provide trades of some assets to those investors who are not accredited, there are just a handful of tokens for trading.
On the other hand, non-security distributed ledger instruments and companies have gained this year. The crypto-exchanges in the States, like Coinbase, put up fresh assets. The tokens with the biggest worldwide marketplace profit and trading amount are non-security tokens. BTC has a marketplace capitalization of more than USD 200B! Behind it are Ethereum Ripple, Tether, Bitcoin Cash, etc. The flexibility of the system in the States paves the way for attracting lots of innovation in the sector.
The production, selling, and exchange of non-security tokens in the States come with some regulatory complications. Firms operating with such digital instruments have to follow lots of Anti-Money Laundering and counter-terrorist financing rules that stem from the Bank Secrecy Act. Cash services like exchanges and guardians of wallets have to sign up with the Financial Crimes Enforcement Network and with lots of the states where they conduct business. Over 50% of the states have some kind of licensing for companies that deal with digital coins.
Moreover, the Uniform Law Commission put out the Uniform Regulation of Virtual-Currency Businesses Act founded on the belief that foreseeable laws made for virtual-currency ventures will give assurance that states will regulate them just like the rest of financial service providers.
The International Financial Action Task Force has released its guidelines on the ways digital asset providers and trading sites can tackle cash laundering. So, blockchain companies in the non-securities area have their own labyrinth of legislation to navigate, while regulatory authorities have shown bigger moves to move towards solutions.
Sure, there are authorities that were enthusiastic about distributed ledger tech. For example, the Office of the Comptroller of the Currency oversees national financial institutions and now has Brian Brooks on its forefront. He used to work and Coinbase, so lots of people believe he wants to see OCC become a leading name in regulation cryptos. This institution recently reported that the country’s banks could offer crypto-services, and in May, Brooks lobbied for a national payments charter for cryptocurrency companies.
The USA doesn’t want to fall far behind and wants to be at the head of the wave of innovation in the blockchain sector. Thus, the New York Department of Financial Services has quickly answered to the pioneering efforts of licensing tech-founded cash transmitters under NYC’s cash transferring law. Adding to the allowance of digital coin licenses to lots of firms under the NY Bitlicence, Gemini and Paxis got trust firm charters from NY DFS in 2015, and in 2019 the Bakkt Trust Company LLC got a restricted purpose trust charter.
Bitgo, for example, registered as a trusted company in South Dakota, moved by its innovation-friendly environment. Also, Wyoming has a state law for establishing a special bank for crypto-holding, called a special purpose depository institution. In August, the NY DFS said yes to a number of coins for sale, trading, and holding, letting lawful digital currency firms trade in these tokens with no aforementioned approval. On the other hand, distributed-ledger-friendly security regulators like the SEC Commissioner Hester Pierce, who talked about a proposal for token securities, seem to be the exception.
All in all, even though there were some moves from the USA security regulators, blockchain seems to be moving at a slow pace. Pioneering efforts moved to non-securities that are abundant with fresh assets, asset categories, and tech – this will probably continue to happen in the near future.