Opinions

Will 2019 Be The Year That Regulates Cryptocurrencies?

Since the inception of Bitcoin and various other cryptocurrencies, their legitimacy has always been a subject of controversy. Although it has indeed been a decade when the world was first introduced to the digitized currencies, the amount of trust masses have put in them is still miniscule. In addition to the common distrust, its image has been further tainted by the plethora of scams and fraudulent projects that have been conducted all over the world, all of which can be associated to the relatively newer technologies that are blockchain and cryptocurrencies. Decentralized technologies bring promise of transparent, reliable, immutable and secure transactions, but all that is overlooked by the never ending list of scams that have been erupting.

There have been numerous cases in which ICOs were conducted and the funding was collected but these projects never got completed and investors were looted. Apparently there was no way of authenticating legitimacy of any of these crowd funding of these projects.

Owing to this, governments have been slightly hesitant to draw up regulatory framework so that cryptocurrencies might be regulated, all over the globe. Whereas some have chosen to put a ban on all sorts of trading activities, deeming it illegal and a punishable crime. Nevertheless, the market that hit all sorts of high in late 2017 suffered through depression all through 2018. Inorder for the ICOs to be legitimate, the government had made it compulsory for all to be registered with the SEC, if they trade any form of financial asset, where bitcoin and ethereum did not qualify as one.

The incumbent institutions have been implying since fall last year that, if a platform is being used to carry out illegal missions or transactions the owner of that platform can be legally held responsible for the crime that was committed. Now, most of the platforms that are built and which are centered on these technologies are never really built from scratch, they are produced from a readily available open source code, which can be accessed by anyone. Brian Quintez, the CFTC Commissioner told at a tech conference, which was held in Dubai that these application developers will be personally held responsible. This statement caused major distress to developers and put them at a very high risk position.

Many of the newer platforms have been charged since last year as they had failed to register with the SEC. This includes EtherDelta, Airfox and Paragon, all with the same charges, i.e. failure to register with the SEC. There had been only a single prior case in which a non fraud ICO was shut down because of the prior mentioned reasons. Robert Cohen the head of the SEC’s cyber unit dished on this subject by clarifying no matter what technology is being incorporated, if it involves the trade of a financial asset it needs to be registered. He said,

The focus is not on the label you put on something or the technology you’re using. The focus is on the function, and what the platform is doing. Whether it’s decentralized or not, whether it’s on a smart contract or not, what matters is it’s an exchange.

The emphasis put on this requirement led a high profile cryptocurrency to shut down voluntarily as they failed to comply with the rules set forth by the SEC. This was no small company as it had some high profile investors namely Andreessen Horowitz, Google Ventures and Bain Capital. The start-up also announced that it will return all of the funding that it has received to its investors which had amounted upto $133 million.

ICOs which were preliminarily deemed to be securities had their status re instantiated as the Ohio congressman Warren Davidson and Florida representative Darren Soto announced the bipartisan bill, the Token Taxonomy Act. This dictated that once a blockchain product had been completely implemented it was no longer considered to be a security and that the securities laws did not apply to them. Still that leaves many that still need to be regulated by the SEC. Alex Sunnarborg, the cofounder of cryptocurrency investment fund Tetras Capital said,

There’s been a huge wave of ICOs and unregistered securities that the SEC needs to regulate.

Moving forward, all the newly instantiated ICOs need to register with the SEC, in order to avoid getting scrutinized or worse get shut down by the institution. The Token Taxonomy Act is just a bill and has to go through a lot of steps in order to appear before a committee. Although it is never certain if a bill even makes it to the committee. However as the year progresses, we shall witness how much regulations will be put on cryptocurrencies.

Habibah Shahid

A Computer Science student but a writer at heart. Habibah writes about Cryptocurrencies and the underlying technology, Blockchain, with the perspective of a Computer Scientist. Email: Contact the editor at editor.news@blockpublisher.com

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