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Carol Goforth, a Law professor at the University of Arkansas recently posted an interesting article about crypto on a law blog ran by the University of Oxford. In her blog post, she outlined the current confusion over crypto and how it is classed, saying crypto is treated as “money, property, a security, and a commodity all at the same time”.
Confusion: What is crypto?
- Internal Revenue Service (IRS) regulates crypto as a property imposing “record-keeping and reporting requirements on purchasers and denying owners the benefits of treating cryptocurrencies as ‘currencies’”
- FinCEN regulates crypto exchange the same as ‘money’ exchange
- The U.S. Commodity Futures Trading Commission (CFTC) treats all crypto as commodities
- The U.S. Securities and Exchange Commission (SEC) treats crypto assets as securities.
You can see where the confusion is coming from here, and this is just at a federal level! Each state then has its own regulations that further determine how it sees a crypto asset. All of this adds up to a confusing and confused industry where innovators have to tread carefully. Fr example, New York is one state where it has been historically difficult to register for crypto trading platforms.
In January of this year, Inverse reported that:
“To date, the New York Department of Financial Services has approved just six firms for virtual currency charters or licenses, while denying those applications that did not meet the department’s standards. What’s odd is that Binance, one of the most popular exchanges this side of Coinbase and perhaps the fastest growing on the planet, has never even applied for the license.”
This goes to show that even between states there can be a disparity between how crypto is regulated and handled, so it received such mixed messages on a federal level also, further confuses the issue.
In Goforth’s blog post, her sense of frustration over the issue is plain to see. The law professor is speaking out to stimulate discussion in the industry over the issue. With crypto becoming more and more popular and part of society’s financial fabric, these issues need to be ironed out.
Goforth actually wrote a paper on the topic, with the same name, for the University of Arkansas, where she suggests that “a more nuanced regulatory approach would be more in line with stated goals of avoiding overregulation, while still allowing each agency room to fulfill its mission.”