The following is a guest commentary from Joseph Weinberg, OECD think tank special advisor and the chairman of Shyft, a blockchain protocol creating a new standard for KYC and AML mandates.
In light of the SEC requiring all crypto exchanges to register with the agency, Mr. Weinberg believes those steps are correct but should be expanded to facilitate intergovernmental agency collaboration in an effort to avoid fractured, country-based governance commonplace with internet-related issues.
“Crypto exchange” is a misnomer
Exchanges are regulated by the SEC and under IOSCO policy to be regulated by securities regulators. Our ecosystem has never been good at branding – bitcoin isn’t actually a coin, ICOs aren’t actually coin offerings and exchanges aren’t actually exchanges.
“Crypto exchanges” are actually marketplaces where buyers and sellers come to transact between two or more parties. The majority of technology professionals building these exchanges aren’t familiar with securities law where terminology is very important. To use the terminology of an exchange implies securities dealings and securities markets.
The SEC is doing their job in protecting consumers from market risks. Any terminology that may mislead and put investors and consumers at risk. It would be correct for the SEC to issue a courtesy to these new companies that if they continue to use terminology like this, they will be scrutinized under securities law. The SEC could bring about a lot of clarity if it would issue a definition of what an exchange is and the laws that govern this to the crypto community.
Need for intergovernmental collaboration on global crypto policies
In order to properly address these issues globally, there needs to be collaboration and coordination between intergovernmental agencies and organizations to focus on policy for the industry. We need to put this in motion now before we have a runaway effect where policy is fractured, like we saw with the internet and are starting to see in the crypto space.
The problem comes when you have one country like Japan overseeing bitcoin as a currency, therefore regulated by the central bank, and another country saying that it is a commodity and regulated by government agencies like the CFTC. Cryptocurrencies are a completely new asset class, which requires new formulas of thinking and new approaches. While the SEC acting proactively is in the right direction, they also need to work with the ecosystem on these issues. We need policy and standards for the global community on how to approach these issues together.