Anda di halaman 1dari 26

White Paper

The Growing Harm of the “Do No Harm” Approach:


Drawing on International Examples to Inform U.S.
Digital Asset Regulatory Reform

Cover photo courtesy of: https://satoshiuncle.com/bitcoin-regulation-countrywise

Thomas B. Nath
BitOoda
March 2019
info@bitooda.com

Copyright © 2019. All Rights Reserved.


The Growing Harm of the “Do No Harm” Approach:
Drawing on International Examples to Inform U.S. Digital Asset Regulatory Reform

Abstract

As interest and global participation in digital assets and their associated technologies grow in
volume and attention, early-mover countries are updating and modernizing their regulatory and
legislative architectures to reflect the reality of this new asset class and attract investment. The
U.S. government has taken a wait-and-see, “do-no-harm” approach designed to explore risks and
opportunities while preventing a regulatory failure that would cause significant harm to U.S.
investors, consumers, or economic interests. That approach has been a welcome contrast to some
countries in Asia and Europe that have adopted more restrictive regulations of cryptocurrency
markets. However, the rising number of crypto-friendly countries — or nations designing
regulatory structures to attract and promote digital asset investment and activity — indicates it
is time for the U.S. to take a more deliberate approach; the spread of crypto-friendly regulatory
activity also provides the U.S. with a set of precedents and models from which to draw for a new
domestic regulatory and legislative architecture. The gaps, overlaps, and ambiguities in today’s
U.S. digital asset regulatory structure have created confusion, driven market activity elsewhere,
and put the U.S. behind in the global digital asset movement. This paper lays out the need for
clearer regulation, reviews the U.S. approach to date, identifies the areas where regulatory clarity
is most needed, and draws on global precedents for lessons and characteristics to inform a new
U.S. virtual currency regulatory framework.

Contents

I. Background
▪ The Growth of Virtual Currencies in the Global Landscape
▪ The Need for Coordinated Regulation
▪ Regulatory Efforts & Discussions to Date: U.S. and Global Bodies
II. Analysis
▪ Where Reform is Needed
▪ Growth of Crypto-Friendly Regulatory Architectures: Other Countries’ Approaches
III. Proposals & Recommendations
▪ Draw from International Precedent to Modernize U.S. Regulatory Structure
▪ Leverage Self-Regulation & Industry Expertise for Regulatory Advancement

1|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
About BitOoda

BitOoda is a digital asset advisory firm specializing in trade execution, market analysis,
and structured products. Founded in New York in August 2017, BitOoda was created
to deliver transparency and promote normalization of industry practices in the digital
asset space. The firm aims to evolve digital asset markets through price discovery tools
and research-led efforts that put clients’ interests on the forefront. Today, BitOoda:

• Provides high-touch brokerage services and helps clients navigate over-the-


counter trades for digital assets such as BTC and ETH.

• Brokers block trades for Bitcoin Futures contracts listed on CME.

• Provides execution services and guidance on structuring derivatives to manage


treasury risk strategies.

• Is establishing Proof-of-Concept for the next generation of financial products by


integrating financial engineering and tokenization technology.

Contact:
info@bitooda.io
185 Hudson Street
Jersey City, NJ 07302

2|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
THE GROWTH OF VIRTUAL CURRENCIES IN THE GLOBAL LANDSCAPE

With the explosion of interest and investment in virtual currencies, digital assets, and
their related technologies — namely blockchain, or distributed ledger technology (DLT)
— opinions abound among industry leaders and government regulators about how best
to govern this new asset class. Some market participants decry the government’s focus
on cryptocurrency and complain that any regulation will stifle innovation, put U.S.
companies at a disadvantage compared to foreign competitors, and send investment
money overseas.12 Other industry players have been clamoring for the SEC, CFTC,
Congress and other government bodies to more decisively and comprehensively lay out
a coordinated set of rules that account for all of the potential definitions, applications,
and activities related to digital assets; these proponents follow the general argument
that “U.S. markets embrace reasonable regulation to ensure transparency and fairness.” 3

The government’s response has been a wait-and-see, “do-no-harm”4 approach designed


to explore risks and opportunities, promote fintech innovation, and avoid a regulatory
failure that would cause significant harm to U.S. investors, consumers, or economic
interests. “Regulatory authorities continue their path of education and observation of
the digital markets, following the lead of regulators’ initial handling of the Internet.”5

However, the majority of industry leaders and investors, according to one 2018 survey,
believe that cryptocurrency trading and use “should be regulated in the United States at
the federal level, but that the industry lacks a well-grounded understanding of how
existing regulation of financial markets or services might already apply.”6

Meanwhile, other countries are moving ahead with modernizing their economies in
anticipation of the growth of blockchain and virtual currency. “While we struggle to

1 https://www.trudex.io/cryptocurrency-regulation-pros-cons/
2 https://bitcoinist.com/2018-will-be-the-year-of-regulation-but-is-that-a-bad-thing/
3 https://hbr.org/2018/07/how-regulation-could-help-cryptocurrencies-grow

4 https://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlo37

5 https://www.fintechupdate.com/2018/07/digital-tokens-and-coins-advisories-and-regulatory-proposals-

cftc-and-financial-stability-board-pronouncements/
6 https://www.foley.com/files/uploads/Foley-Cryptocurrency-Survey.pdf

3|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
overlay existing regulatory frameworks onto new technology that is useful precisely for
its fluidity... other areas of the world are embracing the ambiguity and learning by
doing.”7 Some countries (such as China, India, and Brazil) have decided to restrict the
growth of digital assets by cracking down on alleged fraudulent or illicit activities;
ordering their banks not to work with virtual currency companies or account
holders; issuing restrictive executive, legislative, or judicial guidance; and/or failing to
communicate whether or how digital assets fit into their legal and regulatory structures.
Others (such as the U.S., U.K., South Korea, and Singapore) are taking a moderate or
mixed approach; some in this category are watching how the market evolves and
issuing ad hoc or limited-focus guidance, while others are taking a less-deliberate but
equally-indecisive approach by debating, discussing, and making minor reactionary
adjustments to their regulatory guidance.

The third category of countries – those who have proactively enacted regulatory
structures that promote cryptocurrency markets – is the focus of this paper. These
include Japan, Switzerland, Lithuania, Australia, Canada, Malta, Gibraltar, Thailand,
and United Arab Emirates (UAE). These countries’ approaches are discussed below in
the context of how they could inform the way ahead for the United States.

THE NEED FOR COORDINATED REGULATION

Regulators, industry, and some in the U.S. Congress are, over time, converging around
a consensus that the country needs a clearer set of regulations and laws that better
enables cryptocurrency innovation and investment. “Without clear regulations,
cryptocurrency innovation in the United States is being stifled. Entrepreneurs sit on the
sidelines for fear of innocently running afoul of the law. Investors, meanwhile, hang
back because of uncertainty regarding valuations. And the commonweal suffers, as
other countries lure innovators away from the United States by creating rules that
make their jurisdictions more hospitable to this growing asset class” (emphasis
added).”8

7 https://agriculture.house.gov/uploadedfiles/07.18.18_baldet_testimony.pdf
8 https://hbr.org/2018/07/how-regulation-could-help-cryptocurrencies-grow
4|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
9
At a July 2018 congressional
hearing, the Chair of the House
Committee on Agriculture stated
that “providing a strong, clear
legal and regulatory framework
for digital assets is essential … to
enable developers to determine
the nature of their token and then
suitable rules to enable them to
develop their project. How we
regulate these products and those
who develop them won’t
determine if they are developed
and used, but it will determine if
they are developed and used in
our country” (emphasis added).10

Arguably the most significant


basis of the absence of effective
cryptocurrency regulation in the
U.S. is the overlapping,
ambiguous, and uncoordinated
collage of regulatory jurisdictions
across multiple federal and state-
level agencies. One industry
CEO testified to Congress that
“Clarity around legal and
regulatory treatment in various jurisdictions is, perhaps, the most important factor in
the speed of [cryptocurrency’s] evolution” in the U.S.11

9 https://cointelegraph.com/news/sec-cftc-irs-and-others-a-guide-to-us-regulating-bodies
10 https://agriculture.house.gov/news/documentsingle.aspx?DocumentID=4411
11 https://agriculture.house.gov/uploadedfiles/07.18.18_baldet_testimony.pdf

5|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
U.S. financial regulators each define cryptocurrencies in a way that incorporates the
assets into the agency’s jurisdiction. “This conflicting patchwork has the potential to
stifle innovation, limit market diversity and reach, and increase cost of credit that
would impede growth and small business formation,” according to the U.S. Chamber of
Commerce.12 In addition to this confusion at the federal level, some U.S. states have
imposed their own requirements, such as New York’s Bitlicense,13 while others are
embracing virtual currency, such as Ohio’s acceptance of Bitcoin to pay taxes.1415

Effective cryptocurrency regulation in the U.S. must be founded on a coordinated,


cross-jurisdictional regulatory architecture that cuts across federal executive branch
agencies to deconflict the multiple sets of requirements that apply to digital assets. In
other words, “Congress and regulators may want to consider developing a new
framework that takes into account the diverse characteristics and unique economic
relationships embedded in the many types of digital assets.”16

REGULATORY EFFORTS & DISCUSSIONS TO DATE: U.S. AND GLOBAL BODIES

The pace of regulatory discussion and action is accelerating, both in the U.S. and
abroad.17 Generally, but not uniformly, the tenor of regulatory discussions in the U.S.
has been positive, as regulators and Congress continue their “do-no-harm” approach.
However, this approach is not going far enough to establish the regulatory architecture
the U.S. needs to avoid disadvantaging American competitiveness.

The scope of recent activity is too broad to analyze here comprehensively, but includes:

12 https://www.forbes.com/sites/astanley/2018/07/22/u-s-chamber-calls-for-regulatory-clarity-on-
cryptocurrencies-initial-coin-offerings/
13 https://www.dfs.ny.gov/banking/virtualcurrency.htm

14 https://www.forbes.com/sites/kellyphillipserb/2018/11/26/ohio-becomes-the-first-state-to-allow-

taxpayers-to-pay-tax-bills-using-cryptocurrency/#106fe9d36b04
15 https://ohiocrypto.com/

16 https://agriculture.house.gov/news/documentsingle.aspx?DocumentID=4411

17 https://www.fintechupdate.com/2018/07/digital-tokens-and-coins-advisories-and-regulatory-proposals-

cftc-and-financial-stability-board-pronouncements/
6|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
18

● SEC’s designation of Valerie Szczepanik as associate director for the Division of


Corporation Finance and senior adviser for Digital Assets and Innovation, 19 and
SEC’s subsequent establishment of a “Fintech Hub” to facilitate engagement
between industry and regulators.20

18 https://www.financemagnates.com/cryptocurrency/news/good-bad-ugly-crypto-regulation-usa/
19 https://www.sec.gov/news/press-release/2018-102
20 https://www.sec.gov/finhub

7|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
● The formation of a working group led by the Department of Treasury’s Financial
Stability Oversight Council (FSOC).2122
● The formation of a Department of Justice-led Task Force on Market Integrity and
Consumer Fraud.2324
● The formation of a Blockchain Working Group in the Federal Trade
Commission.25
● A Treasury Department report on proposals to promote fintech in the U.S.26
● A growing number of congressional hearings across multiple bodies, including
the Senate Committee on Banking, Housing, and Urban Developments27; the
House Financial Services Committee28; and the House Agricultural Committee.29
● The updating of a bilateral Memorandum of Understanding between SEC and
CFTC to promote information sharing and collaboration.30
● Actions by U.S. states to promulgate blockchain or virtual asset regulation, 3132
along with New York’s continued BitLicense requirement.
● A series of bills introduced in Congress related to blockchain and digital assets,
including the “U.S. Virtual Currency Market and Regulatory Competitiveness

21 https://www.treasury.gov/initiatives/fsoc/council-meetings/Documents/December142017_minutes.pdf
22 http://thehill.com/policy/finance/368692-mnuchin-says-group-of-financial-regulators-will-probe-
cryptocurrencies
23 https://www.whitehouse.gov/presidential-actions/executive-order-regarding-establishment-task-force-

market-integrity-consumer-fraud/
24 https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-remarks-

announcing-establishment-task
25 https://www.ftc.gov/news-events/blogs/techftc/2018/03/its-time-ftc-blockchain-working-group

26 https://home.treasury.gov/sites/default/files/2018-07/Nonbank%20Financials%20EO%20-%20Fact-

Sheet%20FINAL.PDF
27 https://www.banking.senate.gov/hearings/virtual-currencies-the-oversight-role-of-the-us-securities-

and-exchange-commission-and-the-us-commodity-futures-trading-commission
28 https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=403735

29 https://agriculture.house.gov/calendar/eventsingle.aspx?EventID=4403

30 https://www.sec.gov/news/press-release/2018-114

31 https://www.fintechupdate.com/2018/03/massachusetts-enforces-while-arizona-provides-flexibility-to-

fintech/
32 https://coincenter.org/files/2017-03/statevirtualcurrencyprinciplesandframeworkv2.0.pdf

8|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
Act,” which directs the CFTC to study foreign virtual currency regulation and
recommend changes to promote U.S. competitiveness in the industry.3334
● A roundtable sponsored by U.S. Congressman Davidson to discuss digital asset
regulation.3536
● Letters from Congress members to the SEC requesting and proposing regulatory
clarity,37 and another Congressional effort to get the IRS to better regulate digital
assets from a tax perspective.38
● The formation of two new lobbying groups: the Blockchain Association and the
Securing America's Internet of Value Coalition group.
● The New York Attorney General’s Virtual Markets Integrity Initiative report.39
● Continued enforcement actions by the SEC against ICOs, its repeated rejection of
digital asset Exchange Traded Fund (ETF) proposals, the expansion of SEC’s
enforcement activity to include decentralized exchanges, and the continued
issuance of advisory notices regarding virtual assets.4041

A number of international bodies also are weighing in on cryptocurrencies from a


governance, oversight, and regulatory perspective:

● The Financial Stability Board (FSB), an international organization that monitors and
makes recommendations about the global financial system,42 has published a series
of reports that conclude “crypto-assets do not pose a material risk to global financial

33 https://soto.house.gov/media/press-releases/rep-soto-members-introduce-bipartisan-bills-preventing-
virtual-currency-price
34 https://coincenter.org/entry/three-pro-cryptocurrency-bills-are-being-introduced-in-congress

35 https://davidson.house.gov/media-center/press-releases/what-theyre-saying-about-davidson-budd-

soto-emmer-roundtable
36 https://www.cnbc.com/2018/09/24/lawmakers-venture-capitalists-and-crypto-companies-descend-on-

on-capitol-hill-to-debate-regulation.html
37 https://www.cnbc.com/2018/09/28/congress-ask-sec-chairman-for-clarity-on-cryptocurrency-

regulation.html
38 https://waysandmeansforms.house.gov/uploadedfiles/letter_irs_virtual_currencies.pdf

39 https://virtualmarkets.ag.ny.gov/

40 https://www.cftc.gov/Bitcoin/index.htm

41 https://www.sec.gov/ICO

42 http://www.fsb.org/about/

9|Page
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
stability at this time. However, vigilant monitoring is needed in light of the speed of
market developments.”43

● The FSB also is coordinating with other global standard-setting bodies, and set out a
framework for monitoring the impact of digital assets on global financial stability.44
It laid out these updates and proposals in a letter to the G20 in July 2018:

o The Committee on Payments and Market Infrastructures (CPMI) has


conducted significant work on applications of distributed ledger technology,
and is conducting outreach, monitoring, and analysis of payment
innovations.

o The International Organization of Securities Commissions (IOSCO) has


established an ICO Consultation Network to discuss experiences and
concerns regarding ICOs, and is developing a Support Framework to assist
members in considering how to address domestic and cross-border issues
stemming from ICOs that could impact investor protection. IOSCO is also
discussing other issues around crypto-assets, including, for example,
regulatory issues around crypto-assets platforms.

o The Basel Committee on Banking Supervision (BCBS) is assessing the


materiality of banks’ direct and indirect exposures to crypto-assets, clarifying
the prudential treatment of such exposures, and monitoring developments
related to crypto-assets for banks and supervisors.

● The Financial Action Task Force (FATF) has been reporting to the G20 on its work
concerning the money laundering and terrorist financing risks related to crypto-
assets. In October 2018, it updated its Risk Based Approach for Regulating Virtual
Assets, and issued new guidance on global standards for ensuring digital assets are
not used for money laundering and terrorist financing. The G20 recently agreed to
regulate cryptocurrency according to FATF’s standards for anti-money laundering
and countering terrorist financing (AML/CTF).45

43 http://www.fsb.org/2018/10/crypto-asset-markets-potential-channels-for-future-financial-stability-
implications/
44 http://www.fsb.org/2018/07/fsb-report-sets-out-framework-to-monitor-crypto-asset-markets/

45 https://bitcoinist.com/g20-regulate-cryptocurrencies-fatf/

10 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
● In November, the head of the International Monetary Fund (IMF) said that countries
should consider issuing their own government-sponsored virtual currencies.46 This
followed an IMF report in May that said cryptocurrencies “do not appear to pose
risks to financial stability.”47 In its Global Financial Stability Report, the agency
promoted international cooperation on regulation, noting that cryptocurrencies
“could [pose a risk] should their use become more widespread without the
appropriate safeguards.”48

● The U.S. Bureau of Consumer Financial Protection, in partnership with regulators


from 11 countries around the world, created the Global Financial Innovation
Network (GFIN), a multinational network focused on global fintech regulation.49

WHERE REFORM IS NEEDED

The gaps, overlaps, and ambiguities in today’s U.S. digital asset regulatory structure
have created confusion, driven market activity elsewhere, and put the U.S. behind in
the global digital asset movement. This section will briefly touch on the main areas
where U.S. regulations need to be clearer, modernized to address digital assets as a new
instrument of the U.S. financial system, and defined in order to establish the
appropriate protections for investors and the definitions that market actors need.

Asset Classification

Defining when digital assets are securities, commodities, currencies, property, or


another type of asset – and determining which existing laws and rules apply in each
case – is the most fundamental and critical question that needs to be addressed.50 There
may not be a universally-applicable set of rules on this question – SEC Chairman Jay
Clayton recently reinforced that digital token classification must “depend on the facts

46 https://www.theguardian.com/business/2018/nov/14/imf-says-governments-could-set-up-their-own-
cryptocurrencies
47 https://cointelegraph.com/news/imf-report-says-crypto-does-not-pose-risks-to-global-finance

48 https://www.imf.org/en/Publications/GFSR/Issues/2018/04/02/Global-Financial-Stability-Report-April-

2018
49 https://www.consumerfinance.gov/about-us/newsroom/bcfp-collaborates-regulators-around-world-

create-global-financial-innovation-network/
50 https://cointelegraph.com/news/money-or-assets-how-world-governments-define-cryptocurrencies

11 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
and circumstances,” and “that designation may change over time.”51 However, the
confusion that exists in today’s U.S. market – even among veteran Wall Street financial
firms – over how to apply traditional financial regulations to cryptocurrency means that
additional communication and guidance is needed.

As described by the FSB in its July 2018 report, “Since certain crypto-assets … may not
be subject to financial regulation, it is important to coordinate with those other sectoral
financial regulators who may have jurisdiction. … Where crypto-assets are used solely
for payment purposes (and are not securities), crypto-asset platforms trading such
assets could, depending on the jurisdiction, be viewed more as part of the payments
infrastructure or as some type of spot market exchanges.”52 (See box for additional
discussion of utility vs. security tokens.)

That statement illustrates the regulatory breadth of digital assets: the regulations
governing a given asset may exist across numerous jurisdictions, agencies, and sectors
of the financial market depending on the asset’s characteristics. Another example is
stable coins, such as Tether and USD Coin; as fiat-pegged coins, they could be regulated
as a form of e-money or an instrument of value requiring the issuer to be
licensed/registered as a money transmitter. However, they might also be securities in
some jurisdictions, depending on determinations and definitions that today are too
subjective. Further, stable coins pegged to non-fiat assets (such as gold) may be
classified as derivatives, further muddying the regulatory requirements.53

Licensing Guidelines (also see Box: Emerging Digital Asset Business Models in Today’s
Regulatory Landscape)

A related question is how – based on the classification of an asset – the firm or firms
associated with that asset are required to register and what licenses are required for
their intended activities. SEC governs broker and broker dealer licensing; CFTC
handles introducing brokers and futures commission merchants; and FinCEN regulates

51 https://coincenter.org/link/sec-chairman-clayton-just-confirmed-commission-staff-analysis-that-
ethereum-and-cryptos-like-it-are-not-securities
52 http://www.fsb.org/wp-content/uploads/P160718-1.pdf

53 https://www.lw.com/thoughtLeadership/crypto-utopia-autonomous-next

12 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
money transmitters, which also are subject to state-specific regulations. Coin Center
explains the implications and consequences of this structure:

First, some new business models that could drastically improve the industry and benefit
consumers won’t comply with U.S. law. These businesses either move offshore to
innovate in foreign lands or simply quit and move on to a different product. ... Second,
for those business models who can fit into the existing regulations, the frictional costs of
determining how or even whether these obligations apply, combined with the costs of
ongoing compliance, acts as a barrier to entry... When entrepreneurs talk about “stifling
innovation,” this is precisely what they mean.54

Requirements for KYC/AML, Recordkeeping & Transaction Monitoring

Current rules are inconsistent across federal and state jurisdictions on certain aspects of
KYC/AML requirements. For example, which of the various actors involved in a virtual
currency transaction is required to conduct KYC checks on buyers and sellers is unclear;
rules for filing Suspicious Activity Reports (SAR) vary in terms of the monetary and
frequency thresholds and transaction types that define a “red flag;” record keeping
requirements differ across jurisdictions; and post-transaction monitoring requirements
vary depending on the type of asset and the location. The result is that even firms who
intend to follow the rules can find themselves challenged to do so.

Reconciling Decentralized Financial Activity, Pseudonymity, and Privacy with


Traditional Regulatory Approaches

U.S. regulators seem to be struggling to reconcile the revolutionary change digital assets
bring, principally the decentralized nature and “pseudonymity” of digital assets and
blockchain technology, contrasted with traditional financial activity. SEC, for example,
continues to tout the Howey Test as an effective way to determine its approach to many
regulatory questions related to digital assets;55 the agency’s continued reliance on a 70-
year old legal precedent is perhaps the most indicative example of its failure to
modernize its approach. SEC’s recent regulatory actions against decentralized

54 https://coincenter.org/entry/what-is-money-transmission-and-why-does-it-matter
55 https://www.sec.gov/news/speech/speech-hinman-061418
13 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
EMERGING DIGITAL ASSET BUSINESS MODELS IN TODAY’S REGULATORY LANDSCAPE

Digital asset firms are using a variety of business models to address regulatory and compliance issues, such as
licensing and registration requirements, across federal and state jurisdictions. The issues traditional money
transmitters already were facing with state-by-state registration processes have now extended to virtual currency
firms, and the inconsistent capital and registration requirements for fintech firms represents another factor
inhibiting market growth in the U.S.

Digital investment banks (examples: Satis, Element, ICOBox)


Digital investment banking falls under SEC/FINRA-regulated broker-dealers (BD) that are approved for private
placements. One exemption that has been suggested is the Reg D/Reg S/Reg A approach, but this approach
allows for participation by non-accredited investors and probably would represent an uphill battle for SEC
approval. There are two high-level streams in token issuance: security tokens (equity or debt represented on a
blockchain) and utility tokens (which are intended for use in a company's ecosystem). The regulatory landscape is
burdensome for the former and complicated for the latter, because investors tend to purchase utility tokens as an
investment vehicle (i.e., with the expectation of a profit) even though the ultimate purpose of the tokens is to buy
goods and services or as a governance mechanism for that network/platform. SEC Chairman Clayton recently
corroborated that a token could theoretically transition from being a security to a commodity, although to date
there have been no clear use cases or official regulatory rulings for this type of transition.

Exchanges that list security tokens (examples: Poloniex, Coinbase Pro, Bittrex, Templum)
Registering as a broker-dealer also is necessary for companies looking to broker tokens the SEC classifies as
securities, and many U.S. exchanges have acquired a BD to be able to list these tokens on their Automated Trading
Systems (ATSs). The challenge is that the SEC has not formally defined many of the existing tokens (such as XRP
and EOS) as securities, but FINRA typically does not approve BD licenses for companies to conduct business that
does not officially require a BD. Moreover, even if the SEC does define these tokens as securities, the BD would
not be able to broker unregistered securities, meaning these companies cannot achieve full compliance unless
SEC/FINRA issues safe harbor for the token issuers, which has not happened to date.

Virtual currency derivatives brokers (example: BitOoda) and exchanges (example: LedgerX)
Brokers for virtual currency derivatives are required by CFTC/NFA to register as an introducing broker (IB).
Exchanges for virtual currency derivatives are required to register as a Designated Contract Market (DCO) or
Swap Execution Facility (SEF).

Virtual currency exchanges and ATMs (examples: Coinbase, Gemini, itBit, Poloniex, Bittrex, CoinSource)
Exchanges that allow trading of virtual currencies, such as Coinbase, fall into a grey area in which two regulatory
paths have been used. The first is to register as a Money Services Business (MSB) with a Money Transmitter
License (MTL). This is done by registering with FinCEN at the federal level and then registering state-by-state,
which is a time consuming, cumbersome, and costly process given that each state has different capital
requirements and fees.1 The second approach is to register as a Chartered Trust. Examples of this are Gemini and
itBit. The benefits of the chartered trust route are that the majority of states do not require a chartered firm to get
a MTL, and the capital and regulatory requirements are less cumbersome than that of a chartered bank.1

14 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
exchange EtherDelta56 also indicate its inherent discomfort with the anonymity of the
digital asset space.

Another example of the inherent conflict between traditional financial regulation and
the new world of decentralized and technology-based trust regimes is privacy coins
(such as Monero, Dash, and Zcash), which are viewed with skepticism by many
investors. Regulators face increased pressure to reject anonymity wherever crypto
markets intersect with the traditional financial services sector,57 causing some coins to
be issued for regulatory compatibility and other privacy coins prioritizing secrecy and
off-market activity. The regulatory struggle surrounding this sub-class of virtual
currencies illustrates the broader dichotomy between fintech advancement and
regulators’ continued reliance on traditional oversight approaches.

Clearing, Custody & Settlement

Establishing standards and a fully developed infrastructure for clearing, custody and
settlement is essential for large-scale institutional entry into the digital asset space.
However, regulators have used the lack of that infrastructure as a justification for the
rejection of efforts to broaden digital asset investment options, such as SEC’s continued
unwillingness to approve the numerous Bitcoin ETF applications it has received.58 This
is an area where industry self-regulation is needed to define standards and rules, but
clear and authoritative regulations need to follow that development.

Consumer Protection and the Establishment of Safe, Fair & Transparent Markets

Both SEC and CFTC see their primary function as protecting investors. As noted above,
they have asserted jurisdiction over different aspects of the digital asset space and
conducted enforcement actions in an ad hoc manner. The digital asset industry needs a
single set of standards and issuances on consumer protection requirements and other

56 https://www.sec.gov/news/press-release/2018-258
57 http://www.allenovery.com/publications/en-gb/lrrfs/cross-border/Pages/Cryptocurrency-AML-risk-
considerations.aspx
58 https://bravenewcoin.com/insights/securities-ripple-icos-etfs-and-enforcement-sec-chairman-lays-it-

out-at
15 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
issues critical to the establishment of safe, fair, and transparent markets. These
standards should address:

• Disclosures & transparency.


• Conflicts of interest, including firms that span multiple market activities such as
trading, investment advice, and research.
• Price formation and combating price manipulation.
• Combating predatory trading practices.

Some of these issues can be addressed by industry self-regulation, but U.S. federal
agencies need to better define their strategy for cracking down on legitimately bad
actors if they intend to protect digital asset investors and support the growth of this
sector in the United States.

ICOs

Nowhere have we seen more consistent and frequent legal action, regulatory
enforcement, and investor alert issuances than those the SEC has conducted against
ICOs. This is for good reason – some studies have estimated that 80 percent of ICOs are
fraudulent59 and that investors have been swindled out of $100 million in the past two
years.60 The need for ICO regulation and enforcement is real, but there have been no
official regulatory issuances providing guidance on how crypto startups or other coin
issuers/managers can best position themselves for full ICO compliance. Investor alerts
and crackdowns on fraud are important for investor protection, but do not contribute to
the promotion of the digital asset marketplace or advance efforts to establish the U.S. as
a global leader in digital asset innovation.

59https://www.investopedia.com/news/80-icos-are-scams-report/
60https://www.marketwatch.com/story/ico-swindlers-have-absconded-with-some-100-million-in-
investor-dough-research-firm-says-2018-08-15
16 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
61

GROWTH OF CRYPTO-FRIENDLY REGULATORY ARCHITECTURES: OTHER


COUNTRIES’ APPROACHES

There is a growing list of countries that have promulgated regulations and legislation to
support the governance and promote the growth of virtual assets. The table below lists
some of those nations, categorizes their approaches to crypto regulation, and explains
some attributes of their legal and governance structures.

61 https://www.lw.com/thoughtLeadership/crypto-utopia-autonomous-next
17 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
COUNTRY REGULATORY KEY ATTRIBUTES
APPROACH
Australia Coordination & • The AUSTRAC compliance guide62 consolidates
Consolidated KYC/AML information into a single set of references.
Guidance AUSTRAC also issued a new law and regulation on
crypto exchanges addressing registration, KYC,
Clear Definitions records, AML/CFT reporting obligations.63
• In 2017, Australia’s government declared that
New Laws cryptocurrencies were legal and Bitcoin (and
cryptocurrencies that shared its characteristics) should
be treated as property.6465
• Australian Securities and Investments Commission
(ASIC) issued guidelines in 2017 on ICOs and
crypotocurrencies, advising that the structure of a
token (security or utility) will determine its legal
treatment under consumer law.66
Bermuda67 New Laws • Legislature passed a law that lets ICO issuers apply to
the Minister of Finance for timely approval.68
Coordinated • Drafting laws to open the doors to crypto exchanges
Guidance and related services, amended its Banking Act to
enable banks to cater to fintech and blockchain
companies, and passed a Digital Asset Business Act. 69
• The Bermuda Monetary Authority posted a series of
virtual currency regulatory documents for easy
reference.70

62 http://www.austrac.gov.au/businesses/obligations-and-compliance/austrac-compliance-guide
63 http://www.austrac.gov.au/media/media-releases/new-australian-laws-regulate-cryptocurrency-
providers
64 https://complyadvantage.com/knowledgebase/crypto-regulations/cryptocurrency-regulations-australia/

65 https://www.budget.gov.au/2017-18/content/glossies/factsheets/html/FS_innovation.htm

66 https://asic.gov.au/regulatory-resources/digital-transformation/initial-coin-offerings-and-crypto-

currency/
67 https://www.nytimes.com/2018/07/29/technology/cryptocurrency-bermuda-malta-gibraltar.html

68 https://marketexclusive.com/bermuda-to-introduce-changes-in-banking-laws-catering-to-fintech-

blockchain-companies/2018/07/
69 https://www.finextra.com/newsarticle/32339/bermuda-to-create-new-class-of-banks-to-encourage-

fintech/vcurrency
70 http://www.bma.bm/document-centre/notices/SitePages/Home.aspx

18 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
Canada Clear Definitions • Defined virtual currencies as securities and issued a
notice on how to apply securities laws to digital
assets.71
• Drafting amendments to Canada’s Proceeds of Crime
(Money Laundering) and Terrorist Financing Act to
include cryptocurrency exchanges that will essentially
make them regulated in the same way as Money
Services Businesses.72
Gibraltar73 New Laws • Gibraltar’s Financial Services Commission (GFSC)
sponsored three laws published in July 2018 allowing
companies to issue new cryptocurrencies and trade
existing ones.
Japan74 New Laws • Officially recognizes cryptocurrencies as legal tender.
• After a series of hacks, “Japan’s Financial Services
Self Regulation Agency (FSA) has stepped up efforts to regulate
trading and exchanges: amendments to the Payment
Clear Definitions Services Act now require cryptocurrency exchanges to
be registered with the FSA in order to operate – a
process which can take up to six months, and which
imposes stricter requirements around both
cybersecurity and AML/CFT.”75
• Japanese Virtual Currency Exchange Association
(JVCEA) is a fully accredited SRO and is working with
government regulators to create new rules governing
the country’s digital asset markets.76
Lithuania77 Clear Definitions • Lithuania’s Ministry of Finance in June 2018 issued
new guidance on ICOs and crypto activity in the
Coordinated & country,78 in an attempt to promote the country as a
Consolidated welcoming environment for digital asset activity.
Guidance

71 https://www.osc.gov.on.ca/documents/en/Securities-Category4/csa_20170824_cryptocurrency-
offerings.pdf
72 https://complyadvantage.com/knowledgebase/crypto-regulations/cryptocurrency-regulations-canada/

73 https://www.nytimes.com/2018/07/29/technology/cryptocurrency-bermuda-malta-gibraltar.html

74 https://complyadvantage.com/knowledgebase/crypto-regulations/cryptocurrency-regulations-japan/

75 https://complyadvantage.com/knowledgebase/crypto-regulations/cryptocurrency-regulations-japan/

76 https://www.coindesk.com/japanese-crypto-exchange-group-gets-legal-status-to-self-regulate-industry/

77 https://finmin.lrv.lt/uploads/finmin/documents/files/ICO%20Guidelines%20Lithuania.pdf

78 https://www.hlengage.com/lithuania-issues-ico-guidance

19 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
• The guidance addressed regulation, taxation,
accounting, and AML/CFT.79
Malta80 New Laws • Parliament passed a series of three new laws, which
took effect in November 2018, that established a
comprehensive regulatory framework for blockchain,
cryptocurrency, and DLT.81
• Its goal was to become the first country in the world –
with the nickname “blockchain island” – to have a
dedicated framework for attracting and governing DLT
and cryptocurrency investment.
Switzerland82 New Regulation • Zug has developed a regulatory architecture to
specifically attract crypto business, labeling itself
Coordinated & Crypto Valley.83
Consolidated • Switzerland’s Financial Market Supervisory Authority
Guidance (FINMA) issued dedicated guidance on “how it intends
to apply financial market legislation in handling
Clear Definitions enquiries from ICO organisers. The guidelines also
define the information FINMA requires to deal with
such enquiries and the principles upon which it will
base its responses, creating clarity for market
participants.”84
• FINMA also issued a new FinTech license process for
firms registered and operating in Switzerland that is
less restrictive than previous licenses.85
• The Swiss Federal Council issued a comprehensive
report in December 2018 that provided a legal
framework for DLT, clarifying the country’s intent to
regulate blockchain within its existing laws.86
Thailand Coordinated & • Thailand’s SEC issued dedicated guidance for
Consolidated exchanges, brokerage firms, dealers and other entities
Guidance

79 https://news.bitcoin.com/lithuania-cryptocurrency-ico-guidelines/
80 https://www.nytimes.com/2018/07/29/technology/cryptocurrency-bermuda-malta-gibraltar.html
81 https://www.forbes.com/sites/rachelwolfson/2018/07/05/maltese-parliament-passes-laws-that-set-

regulatory-framework-for-blockchain-cryptocurrency-and-dlt/#22946f1149ed
82 https://www.ccn.com/switzerland-lays-guidelines-support-icos/

83 https://www.nytimes.com/2018/07/29/technology/cryptocurrency-bermuda-malta-gibraltar.html

84 https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/

85 https://www.finma.ch/en/authorisation/fintech/fintech-bewilligung/

86 https://www.coindesk.com/swiss-government-to-regulate-blockchain-within-existing-financial-laws

20 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
that addresses ICOs, registration and licensing,
Clear Definition registered capital, and other governance issues.8788
UAE89 Clear Definition • The UAE Central Bank is in the process of developing a
legal framework for virtual currencies, as well as an
Pro-Crypto Policies official Dubai cryptocurrency called emCash.
• Abu Dhabi’s Financial Services Regulatory Authority
released a report in 2017 classifying ICOs as securities
and cryptocurrencies as commodities.
• The Smart Dubai initiative is focusing on blockchain
technology as a central aspect of efforts to improve
government efficiency, and UAE has adopted a
Blockchain Strategy to promote its growth.

PROPOSALS & RECOMMENDATIONS

1. Draw from International Precedent to Modernize U.S. Regulatory Structure

Some characteristics of the regulatory approaches taken by crypto-friendly nations are


applicable in the U.S., where federal regulators should draw from these international
precedents and examples to rethink the country’s overall approach if their goals are to
position American companies to be competitive and promote U.S. fintech leadership.

● Cross-Jurisdictional: These countries’ approaches generally span multiple


ministries and regulatory organizations within their countries, meaning they
work across the range of jurisdictions relevant to the governance of digital assets.
This often includes a mix of executive and legislative branches, and some
incorporate – or at least operate with the support of – central banks.

● Single Regulatory Focal Point: Some countries have officially or unofficially


recognized a single focal point among its governmental regulators, and others
have created a new agency with responsibility for digital asset regulation. The
identification of a primary “owner” of virtual currency regulation is a best
practice that would benefit the U.S. market. For example, some have proposed

87 https://news.bitcoin.com/thailand-crypto-regulations-legalizing-cryptocurrencies
88 https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-73398.html
89 https://cointelegraph.com/news/dubai-the-blockchain-oasis-of-the-uae-from-public-to-private-sector

21 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
the establishment of an SEC-controlled central hub for registering ICOs and
other digital asset activity, along with a centralized national crypto exchange. 90

● Unified Framework for All Digital Assets: A critical characteristic of these


global approaches that the U.S. should emulate is for new regulations to address
all forms and applications of virtual assets, meaning they should span digital
assets characterized as commodities, currencies, securities, and utilities.

● Use of Both Executive and Legislative Instruments: The most effective


regulatory approaches use a combination of legislative issuances (laws) and
executive guidance (regulations), as well as outreach to market participants and
the public. For example, Lithuania (see below), issued guidance that reduced
ambiguity simply by linking financial activities to their associated regulatory
requirements, including specific laws and registration/licensing applications.

EXCERPT FROM LITHUANIA’S OFFICIAL ICO GUIDANCE

91

90 https://finance.yahoo.com/news/regulation-crypto-proposed-framework-united-143700864.html
91 https://finmin.lrv.lt/uploads/finmin/documents/files/ICO%20Guidelines%20Lithuania.pdf
22 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
2. Leverage Self-Regulation & Industry Expertise for Regulatory Advancement

Self-regulation can be a powerful tool for the development of effective market


governance and infrastructure. Leveraging industry leaders and experts can bolster the
formation of rules, standards, best practices, and a culture of compliance. However,
industry involvement and assistance with the creation of a more effective governance
structure for digital assets must be accompanied by legislative and regulatory action if
real modernization is to occur.

Regulatory leaders such as CFTC Commissioner Brian Quintenz92 and academic experts
have encouraged the formation of a self-regulatory body for digital assets.93 Although
the SEC and other government leaders have not followed suit in such encouragement,
several working groups and trade associations have emerged to begin to establish
standards across the digital asset landscape.

● The Association For Digital Asset Markets (ADAM) was established in


November 201894 to “foster fair and orderly digital asset markets where
participants can transact with confidence.”95

● The Virtual Commodity Association (VCA) was announced in March to “foster


financially sound, responsible, and innovative virtual commodity markets.”96

● Global Digital Finance (GDF) is “an industry body driving the acceleration and
adoption of digital finance to support the next era of digital commerce.”97

9292https://www.reuters.com/article/us-cryptocurrency-usa-cftc/cftc-commissioner-urges-crypto-
companies-to-self-regulate-idUSKCN1FY274
93 https://hbr.org/2018/07/how-regulation-could-help-cryptocurrencies-grow

94 https://www.bloomberg.com/news/articles/2018-11-27/wall-streeters-who-rushed-to-crypto-create-

sheriff-for-wild-west
95 http://www.theadam.io/

96 https://medium.com/gemini/a-proposal-for-a-self-regulatory-organization-for-the-u-s-virtual-currency-

industry-79e4d7891cfc
97 https://www.gdf.io/

23 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
All three of these groups have launched the development of taxonomies, coin/token
classification frameworks, and codes of conduct that will help establish norms,
standards, processes, practices, and tools to coordinate among digital asset market
players. However, they do not have the formal authority that FINRA has for the SEC or
NFA has for CFTC. For the U.S. to establish a truly effective and comprehensive
regulatory strategy, it must take advantage of the desire by these industry groups to
contribute to the development of a more proactive approach that combines executive
guidance, legislative action, and communication that clarifies the rules, requirements,
and definitions needed to encourage broader acceptance of this new asset class.

CONCLUSION & OUTLOOK: BUILDING ON SEC’S NOVEMBER 2018 STATEMENT


& ACCELERATING CONGRESSIONAL ACTION

In November 2018, three SEC Divisions jointly issued a “Statement on Digital Asset
Securities Issuance and Trading.”98 The statement reviewed a group of recent
enforcement actions related to digital assets and provided the Commission’s views on
three issues: (1) initial offers and sales of digital asset securities (including ICOs); (2)
investment vehicles investing in digital asset securities and those who advise others
about investing in these securities; and (3) secondary market trading of digital asset
securities. The statement offered new guidance on how firms can adhere to federal
securities laws in the context of digital assets, and offered contact information and
reference material that went beyond the Commission’s previous issuances. Moreover,
SEC leaders are increasingly promising that stated that “plain English” guidance is on
its way.99100

These statements supplement the increasing pace of congressional activity, including


the recently-reintroduced bill calling for SEC and CFTC regulatory recommendations
based on foreign examples. In February 2019, four U.S. representatives introduced two
proposed bills: one would direct CFTC and SEC to address manipulation in virtual
currency markets, and the other would direct regulatory agencies to submit a report
addressing the potential benefits of virtual currency in the U.S. commodities market,

98 https://www.sec.gov/news/public-statement/digital-asset-securites-issuuance-and-trading
99 https://www.coindesk.com/sec-commissioner-peirce-confirms-guidance-on-crypto-tokens-is-coming
100 https://www.coindesk.com/sec-official-says-plain-english-guidance-on-icos-is-coming

24 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM
propose legislative changes to promote U.S. competitiveness and encourage the growth
of virtual currencies, and offer a new regulatory structure for virtual currency spot
markets.101 These two bills join other federal blockchain-related bills reintroduced
earlier this year,102 and would – if passed – provide a needed national-level umbrella
over the growing body of state-specific laws. New Hampshire103 and California104 are
now considering bill that would allow state agencies to accept cryptocurrencies as
payment for taxes and fees; Ohio105 this year became the first state to accept Bitcoin for
tax payments; Wyoming106 recently passed two crypto-related bills, including one on
tokenization, and Colorado107 proposed a bill that would exempt cryptocurrencies from
securities laws.

While there is a long way to go in putting forth the type of regulatory clarity that will
address existing ambiguities, encourage market activity, and clarify jurisdictional gaps
and overlaps, the SEC and CFTC, with support from Congress, are well positioned to
take the lead on a coordinated government-wide approach to digital asset regulation
that could draw on international examples and leverage industry expertise to
modernize the U.S.’s approach. We need to reset the “do no harm” approach and
pursue a new strategy to develop a structure that will enhance U.S. global leadership in
a space that could define the future of global financial systems.

101 https://www.virtualcurrencyreport.com/2019/03/blockchain-week-in-review-week-of-february-18-22-
2019-2
102 https://coincenter.org/entry/three-pro-cryptocurrency-bills-are-being-introduced-in-congress

103 http://gencourt.state.nh.us/bill_status/billText.aspx?sy=2019&id=796&txtFormat=html

104 http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB953

105 https://www.forbes.com/sites/kellyphillipserb/2018/11/26/ohio-becomes-the-first-state-to-allow-

taxpayers-to-pay-tax-bills-using-cryptocurrency/#2b50a726b049
106 https://cointelegraph.com/news/us-state-of-wyoming-passes-two-blockchain-related-bills

107 https://leg.colorado.gov/sites/default/files/documents/2019A/bills/2019a_023_01.pdf

25 | P a g e
THE GROWING HARM OF THE “DO NO HARM” APPROACH:
DRAWING ON INTERNATIONAL EXAMPLES TO INFORM U.S. DIGITAL ASSET REGULATORY REFORM