A professor from the University of Arkansas School of Law has written a paper essentially claiming that US regulators are in a state of confusion over exactly what cryptocurrency is.
The article, entitled ‘U.S. Law: Crypto is Money, Property, a Commodity, and a Security, all at the Same Time’, written by professor Carol Goforth for the Journal of Financial Transformation, has recently been published in the University of Oxford’s Business Law blog.
The article is raising eyebrows as it outlines what many some academics and lawmakers are already thinking across the US, that the SEC really doesn’t know how to proceed over cryptocurrency legislation as the commission can’t really classify it.
Goforth claims that part of the problem which prevents correct legislation is the fact that a broad definition does not cover the requirements of the four entities in US government currently dealing with cryptocurrency. The Internal Revenue Service (IRS) defines cryptocurrency assets as property, the Department of Treasury through its Financial Crimes Enforcement Network (FinCEN) “very much like money”, the Commodity Futures Trading Commission (CFTC) as commodities, while the Securities and Exchange Commission (SEC) lumps cryptocurrency assets into its “securities” basket.
Here lies the problem claims Goforth; this diverse set of contradictory definitions make a broader definition impossible, in fact as she points out cryptocurrencies also have other functions not even covered by these four definitions.
Putting aside these four bodies, jurisdictions of individual US states are also bringing in their own guidelines regarding virtual assets, adding even more uncertainty to an already confused area, claims Goforth. Registering an exchange in New York, for example, will require a different process for completing the same activity in, for example, California.
The professor explains that in view of such a diversity of cryptocurrency functions a monolithic approach to defining and therefore regulating virtual currency should be abandoned to make way for far more nuanced thinking by government agencies; an approach which examines the functionality of the crypto asset along with the requirements of the agency issuing guidelines for its use.
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