Stephen Aschettino Contributor
Stephen Aschettino is head of fintech, United States, at law firm Norton Rose Fulbright US LLP.
Only the strong will survive the avalanche of bankruptcies, layoffs and volatility now cascading through the crypto sector.
Investors burned by flimsy promises or forced to panic-sell digital assets will want evidence that companies have undergone proper licensing and due diligence. Customers who buy, sell, borrow or loan crypto will want to rest easy knowing their assets won’t be lost. Prospective buyers, lenders, partners and employees will demand similar assurances.
The crypto winter won’t last forever, but the table stakes for market entry have changed. Federal and state agencies are ramping up their enforcement efforts, legislators are putting forth new proposals and state agencies are setting rules of their own.
To seize new opportunities and stay competitive as the seasons change, regulatory clarity will be key. Answering two key questions can help lay the groundwork.
Is my digital asset going to be considered a security?
Chances are, your digital asset is one of two things: a security (i.e., a financial instrument, like a stock or bond, that represents value) or a commodity (i.e., a basic good that is interchangeable with goods of the same type).
At present, the Securities Exchange Commission (SEC) essentially considers every digital asset aside from Bitcoin and Ethereum to be a security. Though the Commodities and Futures Trade Commission (CFTC) and many others might disagree — and proposed bipartisan legislation would effectively put most digital assets under the CFTC’s jurisdiction — critics say the CFTC isn’t equipped to manage the workload and has significantly less experience than the SEC, which nearly doubled the size of its crypto assets and cyber unit earlier this year.