Blockchain Consultants

Blockchain Transformations Done Here

Regulation

UAE minister of economy: Crypto & tokenization “key” to doubling GDP

by

At a panel for the World Economic Forum’s Global Technology Governance Summit today, United Arab Emirates minister of economy Abdulla Bin Touq Al Marri said that cryptocurrency and asset tokenization will be key to the country’s plans to double its economy — currently estimated to be the 34th largest in the world — in ten years. 

Al Marri was joined on the panel, titled the “Arrival of the token economy, from art to real estate,” by artist Harry Yeff and WEF executive Sheila Warren. While much of the conversation centered on the current NFT craze, Al Marri’s comments centered largely on forthcoming tokenization use cases and their regulation.

According to Al Marri, the country has ambitions to grow its GDP by 7% yearly, which would put it on track to double the size of its economy by 2030. Tokenization will be a key cog in this effort, as “tokenization compliments information-based economies.”

Perhaps most exciting from an adoption standpoint, the minister said that the country has several ambitious projects underway, including a study underway being conducted along with the WEF on funding small and medium sized enterprises with a government-run token platform, possibly as part of a “regional token exchange” which is “in our agenda,” Al Marri said.

When asked about how the government — which by nature is deeply embedded in a pre-token economy — will interact with these new models and the need to regulate them Al Marri said the goal is to protect investors as well as the larger financial system without stifling innovation.

“We’re a government, we’re good at regulation,” he joked.

He highlighted two pain points in particular: Lack of “harmonized regulation,” and lack of sufficient regulation. He noted that jurisdiction and regional regulations need to work together in order to prevent cloistered bubbles of innovation, and to ensure that new asset models, such as fractionalized ownership, benefit all.

“How can we bring fractionalization to a level where everyone can benefit?” He asked.

He also noted that fractionalized ownership can lead to real world-meets-blockchain bugaboos: if an apartment has fractionalized ownership, who pays the upkeep fees? If there’s a fractionalized painting, what happens when the painting gets stolen?

Ultimately, the country is eager to lead the world in facing these questions head-on.

“We understand the challenges as such, but we are experimenting, and allowing the UAE to be a site of experimentation.” 

UAE minister of economy: Crypto & tokenization “key” to doubling GDP

Source

Report: India Mulling Banning IP Addresses of Crypto Exchanges

by

Speculations are growing that the government may consider blocking internet protocol (IP) addresses of crypto-facing businesses and firms operating in the country. 

This step was originally taken against adult sites and Chinese apps like TikTok. Cryptocurrency exchanges are about to receive the same treatment as the government cracks down on crypto use.

The Indian government is reportedly preparing to present a Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the coming days. The bill is widely supported by the Reserve Bank of India (RBI). If it passes, we could see a blanket ban on private ownership of cryptocurrencies in the country.

The Indian populace has criticized this move, with crypto exchanges and key actors in the crypto space labeling the move inappropriate and bigoted. Concerted efforts have been made with some crypto actors launching an online campaign tagged #IndiaWantsBitcoin to influence the government’s decision.

A senior government official informed Reuters that an outright ban on cryptocurrencies was likely as the government is bent on stamping out the volatile asset class. 

The official noted that the government would give crypto investors 3 to 6 months to liquidate their crypto holdings, and deterrents would be fined and not imprisoned.

The Indian government has previously said it is modeling its crypto laws according to neighboring Asian nation China. The government’s position on crypto has remained clear and is captured in the RBI’s statement that cryptocurrencies like Bitcoin were a danger to an already fragile economy.

IP Ban May Not Work Due To Workarounds

But despite reports growing by the day of a blockage of crypto exchanges’ IP addresses, industry experts say this could be hard to enforce.

The government’s ban on Chinese apps like TikTok has enjoyed minimal successes due to the prevalence of virtual private networks (VPNs).

The anonymous protocol, which provides services otherwise inaccessible based on a user’s location, could provide a backdoor through which crypto investors can continue trading in the country. Other routes have been earmarked as loopholes:

“…peer-to-peer (P2P) trading, using cash to buy or sell virtual currencies and using external wallets to store and transfer crypto-assets, using part of the money permitted to send abroad for investment within the liberalized remittance scheme limit of $250,000 can be diverted for buying cryptocurrencies- remain loopholes,” the source stated.

But still, the country is divided in its crypto law. Some government officials like Minister of Finance and Corporate Affairs Nirmala Sitharaman had said the government would take a dynamic approach in regulating the nascent industry. Others have called for an outright ban, the most outcry coming from the RBI camp- an independent but integral part of the Indian financial system.

Crypto analysts say if the government proceeds with the ban, the country could see about 7 million crypto investors lose out on the burgeoning industry.

Report: India Mulling Banning IP Addresses of Crypto Exchanges

Source

Nigeria’s Apex Bank Says Crypto Ban Will Protect Banking Sector

by

A representative of the Governor of the Central Bank of Nigeria (CBN) Governor Godwin Emefiele, has come out to clarify the regulator’s stance on cryptocurrencies in the West African nation. The official said the banks were restricted from providing crypto services, not individuals.

Crypto Trading Not Banned In Nigeria

The representative named Adamu Lamtek told local news outlet Today NG that the apex bank had only sought to protect financial institutions operating in the country from cryptocurrencies due to their volatile nature.

According to Lamtek, this decision does not transmit to a ban for private individuals who want to trade crypto-assets.

“The CBN did not place restrictions from the use of cryptocurrencies, and we are not discouraging people from trading in it,” Lamtek said, according to Today NG. “What we have just done was to prohibit transactions on cryptocurrencies in the banking sector.”

The clarification rides on the back of a backlash by the Nigerian populace who have said the central bank is myopic by failing to take advantage of the burgeoning industry. The CBN had reportedly instructed all commercial banks in the country to close down and discontinue providing crypto services to their customers in a circular.

Following year-long crypto purchases, the African giant became a crypto hotbed in as little as a year. Financial institutions have heeded the governing bank’s instructions and have taken measures to block financial services depicting cryptocurrencies.

Crypto Investors Troop To P2P To Trade Crypto

Danny Oyekan, CEO of investment firm Dan Holdings and social investment app Coins App, feels that this does not transmit to much. According to Oyekan, the government is not changing its position anytime soon on crypto, and the central bank cannot declare the embattled digital assets legal without the approval of the Nigerian Securities and Exchange Commission (SEC).

Oyekan is right in his assessment of the situation as crypto rightly falls under the SEC’s purview. In a September release of last year, the commission said it was providing regulatory guidance to the rapidly-growing industry due to a growing wave of illegal activities. The SEC said this was done in the investing public’s best interest and to promote market integrity and provide transparency.

The commission also seized the opportunity to classify crypto-assets as securities and said this classification is subject to debate by crypto exchanges and issuers. All digital assets will be treated as securities unless a crypto-facing business can prove otherwise to the SEC.

Even though popular crypto platforms like Luno have seen their businesses hit rock bottom following the CBN circular banning crypto earlier in the year, the country’s crypto space has not slowed down in any way. Instead, crypto investors have turned to peer-to-peer (P2P) platforms like Binance.

Crypto holders can buy and sell crypto-assets via over-the-counter (OTC) deals facilitated through crypto exchanges. Even though the average Nigerian is quite skeptical in trusting anyone with their money, the decentralized ethos of crypto originals like BTC has seen the nation embracing P2P and still playing an active role in the global crypto markets, Oyekan notes.

Nigeria’s Apex Bank Says Crypto Ban Will Protect Banking Sector

Source

Decentralized technology can help protect democracy around the globe

by

Recent political developments in the United States demonstrate the critical challenges that centralized technology platforms pose to democracy — in stark contrast to the powerful role social media played in pro-democracy movements in the Middle East and Hong Kong. U.S. election misinformation and disinformation, as well as white nationalism, spread throughout online groups, and prominent political and social leaders found means to amplify falsehoods through technology platforms. 

Within both the public eye and darker corners of the internet, organizers, including members of the Proud Boys, planned the storming of the U.S. Capitol to stop what they believed to be a rigged election. The U.S. events, however, are not isolated. They fit into a broader pattern of centralized social media platforms being used to promote violence, disinformation and insurrection as evidenced in places such as Myanmar and the Philippines.

A byproduct of these events, among others, has been heightened fear that more private decentralized and peer-to-peer, or P2P, technology will offer a new and more powerful tool for domestic terrorists. While these concerns are not unfounded, privacy-focused decentralized and P2P applications can, in fact, protect democratic governance and help us move away from centralized platforms. The key reason is that unlike centralized platforms, they are not in the business of creating echo chambers — targeting users with specific content that suits their interests and potentially amplifying harmful content in order to increase user engagement. This gives us a better way to manage social technology’s impact on public safety, similar to how we’ve previously governed more traditional forms of interaction such as speech, telephone calls and mail.

Centralized platforms

On one hand, the biggest digital media tech companies espouse free speech, but on the other hand, their business model is predicated upon collecting data, creating behavioral profiles and targeting specific content to specific audiences. In the best light, this technical underpinning serves to surface content and services that an individual user would want to see or consume. But more importantly, and of concern to democracy, centralized platforms deliberately seek to get users hooked on the platform through algorithms designed to mass-direct content targeted toward specific audiences. This model allowed Russian intelligence operations to undermine the 2016 U.S. elections through centralized social media platforms, and Islamic terrorist organizations to radicalize and indoctrinate people through YouTube.

Related: Social media giants must decentralize the internet… Now!

After facing public backlash following the Capitol insurrection, the biggest U.S. social media companies stepped in to permanently or indefinitely ban former President Donald Trump’s and others’ accounts. Some have hailed this as a much-needed, minimal show of accountability, especially given how lenient tech companies have been in regard to white supremacy.

I agree that our biggest tech companies did what was needed to protect democracy, albeit in a much-delayed, inconsistent manner. The same calls for regulating social media content, however, are also stoking fears of private and decentralized tech as a new dangerous bogeyman, despite the fact that their business models and technical underpinnings are substantially different.

The case for privacy-focused decentralized and peer-to-peer technology

The key concern of private decentralized and P2P technology is that influential and controversial people who are being regulated on centralized technology platforms will have access to well-designed alternatives with little to no oversight. And this fear is not entirely unwarranted. Telegram, for example, has been found to be a haven for illegal activity and a source of misinformation and hate speech, leading to riots and lynchings in countries such as India. Privacy-focused technology always faces the trade-off between protecting user privacy and ensuring broader public safety and security. The key question, however, is whether democracy and public safety are actually at greater risk if those harmful influencers turn to more novel and private applications.

Privacy-focused decentralized technology solutions offer a better alternative to centralized platforms because their incentives are different. First, designers of privacy-focused applications will find it more difficult to curate content, given the fact that they are collecting little to no data. Second, a P2P design makes it more difficult for users to widely circulate content. This is not to say that decentralized systems entirely prevent users from quickly sending information to many people (e.g., LimeWire), but rather that the outreach is more limited and focused. Furthermore, outreach can be reduced through technical changes, such as limiting group sizes or the ability to forward content.

Dipayan Ghosh, co-director of the Digital Platforms & Democracy Project at the Shorenstein Center on Media, Politics and Public Policy, wrote that regulatory change is sorely needed to “institute the right incentives for companies to act in the public interest without forcing the government to get directly involved in the decision-making process over which kinds of content should be deemed socially unacceptable and as such taken down by the companies.”

While privacy-focused decentralized technology has been historically framed as the means to avoid oversight by Big Brother, it can also fit a broader movement to bolster new regulations, such as changes to Section 230 of the Communications Decency Act. Specifically, private decentralized and P2P technology gives us the ability to turn away from technology platforms designed to surveil, categorize, curate and amplify. The surge in Signal downloads in response to WhatsApp policy changes, for example, demonstrates the growing demand for more private alternatives. Regulation is needed to limit the roles of centralized tech platforms, but it cannot work alone. We need technology to bolster this effort in order and help us realize new technical designs that do not endanger democracy.

Centralized platforms are here to stay. Decentralized and P2P platforms are unlikely to completely replace centralized platforms. To combat extremism, content moderation and regulation will be needed to ensure that centralized platforms live up to the ideals of the internet. An effective way to prevent misinformation or disinformation from spreading out among the public commons is the ability for moderators to quickly disprove and/or block this content in the event it incites violence.

A graver concern around decentralized and P2P platforms is that misinformation and disinformation can continue to spread without the ability for a central body to step in. This is an undeniable challenge. The risk to democracy, however, is dampened by the fact that there is less scope for mass-sharing through P2P and decentralized systems. Research shows that disinformation and misinformation thrive off scale. Removing the targeted outreach and amplification of content can prevent harmful content from proliferating.

Conclusion

American democracy was not undermined and lynchings in India did not happen simply because people communicated misinformation and disinformation through internet technology. This type of information has been circulating well before the creation of the internet, stemming from historical cultural divisions, racism and government failures — see documentation of racial terror in America between the Reconstruction and World War II as an example.

When it comes to the role of technology, we must define the real danger to democracy: centralized technology platforms that enable people to communicate harmful and violent content to a wide audience, and that are based on a business model that directs billions of dollars to magnify content through targeted curation.

Private decentralized or P2P technology poses undeniable dangers, just as the telephone, letters and word-of-mouth. But the beneficial differences between this technology and centralized platforms can be best summarized by the following example: It is illegal for someone to yell “fire” in a theater if there isn’t one, but it is not illegal for that person to falsely tell their neighbor that there is a fire. Private decentralized and P2P applications will be used for illegal activity. But stopping this illegal activity cannot involve infringing on privacy or stopping communication. Instead, we will need to address the underlying causes of these activities.

The Proud Boys storming the U.S. Capitol stems from a history of white supremacy and racial injustice. Violence against Rohingya minorities in Myanmar dates back to the 1950s and a legacy of colonialism. Looking at more privacy-focused technology as the new danger misses the point. Instead of creating a tech bogeyman, we need to address the root causes of misinformation, disinformation and hate speech. And in the meantime, we must regulate our existing platforms and promote alternatives that do not in and of themselves undermine democratic norms.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Nikhil Raghuveera is a nonresident fellow at the Atlantic Council’s GeoTech Center and a project manager at the Equal Justice Initiative. His research focuses on the intersection of technology, social inequality and systems of oppression. Nikhil graduated with an MBA/MPA from the Wharton School and the Harvard Kennedy School. In graduate school, he focused his studies on racial justice, social movements and technology policy.

Decentralized technology can help protect democracy around the globe

Source

Deutsche Bank Calls for Crypto Regulation, Says Bitcoin is ‘Too Big To Ignore’ 

by

Bitcoin’s increasing market capitalization has caused Deutsche Bank to list it as an important asset that is too important to ignore. The premier cryptocurrency has gained more than 1000% since falling below the $4,000 mark in March 2020. It is currently trading close to the $60,000 mark and has a market cap above $1 trillion.

Deutsche Bank’s Stance On Bitcoin

In a report released by the global banking giant, the Deutsche Bank analysts suggested that the Bitcoin price could continue to rise further as long as asset managers and companies continue to enter the market. 

The 18-page report titled “The Future of Payments: Series 2 Part III Bitcoins: Can the Tinkerbell Effect Become a Self-Fulfilling Prophecy?” discussed Bitcoin in its entirety. It also analyzed the key drivers of its historical price growth to a $1 trillion asset.

Deutsche Bank expects governments to start regulating Bitcoin by the end of 2021. The bank stated that Bitcoin had become such an integral asset that central banks and governments now understand the need to start regulating Bitcoins and other cryptocurrencies.

Deutsche Bank is convinced that Bitcoin will remain volatile due to its limited tradeability and liquidity. Although Bitcoin was created to serve as a medium of exchange, it has become more of a speculativce asset in recent years.

According to the researcheres, less than 30% of transactional activity in Bitcoin is related to payments. Therefore, implying that most people hold cryptocurrency as an asset.

Deutsche Bank Custody Plans

Deutsche Bank is not ready to be left behind as it joins banks exploring digital assets or virtual currencies.

In December, the bank announced its plans to develop a fully integrated custody platform designed to cater to institutional clients and their digital assets.

The German lender’s plans were included in a report published by the World Economic Forum. The report indicated that Deutsche bank aims to achieve the milestone by partnering with brokerages and top crypto exchanges worldwide.

The bank also disclosed its plans to create a trading and token issuance platform, bridging digital assets with traditional banking services, and managing the array of digital assets and fiat holdings in one easy-to-use platform.

Bank of New York Mellon, the world’s largest custodian bank, has also announced its entry into the custody market. Last month, BNY Mellon said it would roll out a new digital custody unit later this year to help clients deal in digital assets, including cryptocurrencies.

Meanwhile, Deutsche Bank’s previous survey released in January revealed that Bitcoin and U.S. tech stocks are viewed by investors as the biggest market bubbles right now.

The survey was based on responses from 627 market professionals between Jan. 13-15.

Deutsche Bank Calls for Crypto Regulation, Says Bitcoin is ‘Too Big To Ignore’ 

Source

The Token Taxonomy Act of 2021: Preemption of inconsistent state laws

by

In these hyper-partisan times, any bill that includes sponsors from both sides of the aisle is noteworthy. There is one pending now that is particularly important in the crypto space. On March 8, 2021, H.R. 1628, the Token Taxonomy Act of 2021, was introduced by representative Warren Davidson. It was co-sponsored by representatives Ted Budd, Darren Soto, Scott Perry and Josh Gottheimer.

Terms of the Token Taxonomy Act of 2021

Among other provisions, the bill would exempt “digital tokens” from the definition of security, and it would also preempt inconsistent state regulation. Crypto assets would need to meet certain specified requirements in order to count as “digital tokens” under this act:

  • First, the interest must be created either in response to the verification of proposed transactions, or pursuant to rules for creation that cannot be altered by any single person or persons under common control, or “as an initial allocation of digital units that will otherwise be created in accordance” with either of the first two options.
  • Second, the assets must have a transaction history recorded in a distributed digital ledger or data structure on which consensus is reached via a mathematically verifiable process.
  • Third, after consensus is reached, the transaction record must resist modification by any single person or persons under common control.
  • Fourth, the interest must be transferable in peer-to-peer transactions, and fifth, it cannot be a representation of a conventional financial interest in a company or partnership.

Davidson has explained that the purpose of the bill is to improve regulatory clarity. In addition, in an interview, he suggested that if the bill had been passed in prior years, “it could have forestalled enforcement actions such as the Security and Exchange Commission’s (SEC’s) suit against Ripple Labs.” This comment examines in more detail how the bill might actually play out with regard to certain forms of crypto.

How would Bitcoin fare?

As virtually everyone in the crypto space is likely to know, Bitcoin (BTC) is issued exclusively in mining transactions. In other words, it is created “in response to the verification of proposed transactions,” meeting the first of the requirements to be a digital token. In addition, its transaction history is maintained on the blockchain, satisfying the second of the above requirements.

The entire process is set up to resist modification or change absent consensus among a large and decentralized community. The entire Bitcoin network was set up to be peer-to-peer although numerous exchanges now also exist to facilitate transfers. Finally, Bitcoin is not associated with any company or partnership, and it represents neither an ownership interest nor the right to share in revenues.

Given these facts, Bitcoin would clearly be a digital token. As such, under the new definition proposed in the act, Bitcoin would be excluded from the definition of security. Moreover, under section 2(d) of the act, state securities law regulations regarding registration or imposing limitations on the use of the asset would be precluded from applying to Bitcoin, with the sole proviso that states would retain authority to regulate and enforce actions based on fraud or deceit.

Because the United States Securities and Exchange Commission already excludes Bitcoin from the reach of the federal securities laws, this would not be a change in federal requirements. It would, however, create a uniform state system pursuant to which Bitcoin is excluded from regulation as securities except as to fraud claims.

Would Ripple’s XRP be a “digital token?”

It is not, however, accurate to assume that all crypto assets will count as digital tokens under the act. Consider Ripple’s XRP (and the pending action by the SEC against the company and its executive officers). For those not totally familiar with Ripple and XRP, the XRP ledger was completed by Ripple in December 2012, and the computer code set a fixed supply of 100 billion XRP. When launched, 80 billion of those tokens were transferred to Ripple, and the remaining 20 billion XRP went to a group of founders.

According to the SEC’s complaint, from 2013 through 2014, Ripple made efforts to create a market for XRP by having the company distribute approximately 12.5 billion XRP through bounty programs that paid programmers compensation for reporting problems in the XRP ledger’s code. From 2014 through the third quarter of 2020, the company sold around 8.8 billion XRP in the market and through institutional sales, raising approximately $1.38 billion to fund its operations. Resales, including resales from XRP previously distributed to the company’s founders, were also occurring at this time. So, would XRP be a digital token and thus exempt from regulation as a security under the act?

Related: SEC vs. Ripple: A predictable but undesirable development

The first requirement is actually the biggest problem for XRP. The bill contains three options for the first part of the test, but it is unclear that XRP meets any of them. Because all of the tokens were issued at the launch, there is no argument that XRP is created “in response to the verification or collection of proposed transactions.”

In addition, because all of the tokens were issued at launch, it is clear that Ripple or those in control of the company could have altered the terms under which XRP was to be issued. This leaves the argument that there was “an initial allocation of digital units that will otherwise be created in accordance with” one of the first two alternatives, and it is doubtful that this happened. XRP was never set up to be mined, and Ripple certainly had the ability to maintain control over the asset since it owned the vast majority of it. This makes it appear that XRP would not actually be a digital token, although the facts might be arguable.

It should be noted that the act also provides a very limited exemption for any “digital unit,” which is a much broader term that covers any “representation of economic, proprietary, or access rights that is stored in a machine-readable format.” The exemption covers any person who has acted with a reasonable and good faith belief that the digital unit is a digital token, but it only applies if all reasonable efforts are used to stop sales and return any unused proceeds to purchasers within 90 days of notice from the SEC that it has concluded the interest is a security. Ripple has obviously declined to follow this course, as it is fighting the current SEC enforcement action in court.

While this analysis and result may not disappoint everyone in the crypto community since some have long argued that XRP is not a “true” crypto asset anyway, it is a clear indication that the act does not create a free pass for all crypto offerings. It also would not be the end of the road for Ripple, which could still argue that XRP is not an investment contract under the Howey Test.

Would Facebook’s stablecoins have been “digital tokens?”

One more illustrative example might also be important to understand how the act would work if adopted. Consider Facebook’s original proposal for Libra. On June 18, 2019, Facebook announced in a white paper that it was actively planning to launch a cryptocurrency to be called Libra in 2020. The entire proposal has been renamed and updated, but the terms of the original white paper are the ones that are considered here.

Libra was conceived by Facebook and designed to be a “stablecoin,” with its value pegged to a basket of bank deposits and short-term government securities for a group of historically stable fiat currencies. It was to be governed by the Libra Association, a Swiss nonprofit organization.

The Libra Association was conceived as a group of diverse organizations from around the world, including not only Facebook but also major investors such as Mastercard, Visa, eBay and PayPal. The original plan was to have approximately 100 members for the association by the target launch date, each of which was to contribute $10 million. In exchange, the association members would have the right to oversee Libra’s development, its real-world reserves and even the Libra blockchain’s governance rules. The group of 100 members would also be able to act as validator nodes for the asset.

Libra was not set to be mineable, but rather to be issued as and when the Libra Association determined. The white paper also described a system that would have allowed the association to change how the system operated and, in particular, set rules for the issuance of the assets. While the association would have a relatively large number of diverse members with their own objectives and interests, they would be acting through the association, which is itself a single legal entity. This means that the Libra coin (as originally conceived) would not have fit within the definition of a digital token as set out in the act.

Would that mean Libra would have been a security? As was the case for XRP, the answer is “not necessarily.” The next step would be to ask whether it would have qualified as an investment contract. Depending on how the association determined to issue the coin, and whether there was any possibility of appreciation (which seems unlikely, as it was supposed to be pegged to fiat currencies as a “stablecoin”), the Libra coin might or might not have been an investment contract. The determination would have been based on the same Howey Test that the act was reportedly designed to clarify.

Conclusion

Defining security to exclude digital tokens means that the SEC will retain no authority to regulate fraud in connection with transactions involving these interests, leaving the bulk of enforcement to agencies like the Commodity Futures Trading Commission. While the CFTC has sought enforcement against those who engage in fraudulent or deceitful conduct in the crypto spot markets (where transactions in crypto rather than those involving futures or other derivatives are involved), it lacks the resources available to the SEC.

For example, the CFTC just announced its first enforcement action involving a pump-and-dump scheme, while the SEC’s list of prior crypto enforcement actions includes a number of market manipulation claims in addition to claims against John McAfee, the target of the CFTC’s recent action.

This difference is explainable, in part, by the relative size of the two agencies. The SEC’s 2021 budget justification plan called for support in the amount of $1.895 billion. On the other hand, the CFTC’s 2021 budget request was a relatively modest $304 million. Moving fraud enforcement to the CFTC is, therefore, not necessarily prudent or wise.

In addition, while it is quite clear that the proposed definition of digital token is likely to be far simpler than the Howey test, it is not necessarily going to replace that analysis in all cases.

Does the Token Taxonomy Act offer increased clarity? Absolutely. Preemption of inconsistent state laws could be particularly helpful in this regard. Does it provide certainty in all cases? No, but that is not necessarily a bad thing. Is the act a good idea? Sadly, probably not. Providing a ready exemption from registration for digital tokens might be supportable. Removing them from the definition of security in the current climate where fraud continues to be a major concern is probably not.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Carol Goforth is a university professor and the Clayton N. Little professor of law at the University of Arkansas (Fayetteville) School of Law.

The opinions expressed are the author’s alone and do not necessarily reflect the views of the University or its affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

The Token Taxonomy Act of 2021: Preemption of inconsistent state laws

Source