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Ohio Congressman: Congress’ Inaction Regarding Cryptocurrency Regulation Hurting Economy

2 mins
Updated by Kyle Baird
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Anthony Pompliano, Founder and Partner of crypto-focused hedge fund firm Morgan Creek Digital, has blamed the US’ uncertain regulatory environment for the exit of many cryptocurrency companies, including payments company Circle.
In a blog post published July 22, Circle said that it would be establishing a new subsidiary in Bermuda, in addition to its existing offices in the United States, the United Kingdom, Ireland, and Hong Kong. The company acknowledged that one of the reasons for shifting its operations to Bermuda was due to the existence of transparent regulatory requirements within the country. Warren Davidson, a United States Congressman serving Ohio’s 8th district, agreed with Pompliano’s sentiment, stating that there was a need for greater regulatory certainty within the country. The Congressman proposed that the Congress pass the Token Taxonomy Act, a bill which was presented before the United States Congress back in April, several months ago. According to Davidson, the passing of this particular legislation will be a crucial step towards “providing the light-touch regulatory certainty our economy is lacking”.

united states bitcoin law

United States: A Liability for Blockchain Investors?

Circle is not the first company which has criticized the regulatory framework within the United States. Basis, a stable coin, shut down its operations in December of last year, citing unworkable and unreasonable regulatory constraints. This uncertainty was also addressed by Ripple CEO Brad Garlinghouse and TechCrunch Founder Michael Arrington at TechCrunch Disrupt in August 2018. Arrington said that most investors in the blockchain ecosystem are looking to invest outside the United States in areas such as Israel and Asia. He stated,
“They are actually countries where there’s enough regulatory certainty that entrepreneurs feel safe starting token or blockchain companies there”.
According to Arrington, one of the reasons investors are moving out of the United States is due to the uncomfortable regulatory environment as well as the tax and visa burdens of setting up a company within the United States.

congress government

The Securities Act: An Archaic Piece of Legislation?

One of the key issues behind Circle’s dissatisfaction was addressed in its blog post, namely the SEC’s classification of digital currencies as ‘securities’. The commission currently utilizes the Howey test to determine whether or not a particular asset class is a security. Circle, however, referred to a speech given by Director of Corporate Finance at the SEC William Hinman in 2008 who stated that
“a crypto asset being used in a properly decentralized network may no longer represent a security”.
The Token Taxonomy Act proposed by Congressman Warren Davidson and Darren Soto seeks to exclude digital currencies from the ambit of “securities” by amending the Securities Act of 1933 and the Securities Act of 1934. The legislation also seeks to address this by introducing regulatory certainty for businesses and organizations within the blockchain ecosystem established in the United States. With the regulatory environment unlikely to change in the US, do you think more companies will follow in the steps of Circle and set up base abroad? Let us know your thoughts in the comments below.
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Rahul Nambiampurath
Rahul Nambiampurath's cryptocurrency journey first began in 2014 when he stumbled upon Satoshi's Bitcoin whitepaper. With a bachelor's degree in Commerce and an MBA in Finance from Sikkim Manipal University, he was among the few that first recognized the sheer untapped potential of decentralized technologies. Since then, he has helped DeFi platforms like Balancer and Sidus Heroes — a web3 metaverse — as well as CEXs like Bitso (Mexico's biggest) and Overbit to reach new heights with his...
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