On Token Regulation and Compliance

9 days remain until the Credo Token Pre Sale.

Current efforts to regulate the token industry generally involve the application of legacy regulations to this new domain. This is problematic because the old rules weren’t developed for the specific nature of crypto assets and activity; it’s analogous to applying rules for horse-drawn carriages to cars. This practice results in various side-effects — namely, it chills innovation, such as in the case of Basis, and dampens investor interest in the sector.

To better enable US companies to compete and succeed in this important emerging field, we need a new regulatory framework that addresses the unique properties and challenges of crypto.

BitBounce is happy to proactively engage in the development of such a regulatory framework, such as through our yet-to-be-activated token association.

We don’t claim to have all the answers, but here are a few principles we’d like to embodied in any reform:

1. Legitimize and recognize tokens: Further legitimize crypto dealing with formal government recognition for this asset class.
2. Exempt tokens from legacy regulations: Tokens could be made explicitly exempt from the application of regulations developed for other asset classes, such as for securities and commodities.
3. Create safe havens: Provide designated safe havens for entrepreneurs to innovate in crypto, with the freedom to experiment and deviate from status quo solutions.
4. Eliminate burdens: Licensing and tax burdens could be eliminated or greatly reduced to ease the load on businesses.
5. Formalize processes: Certain processes for important scenarios could be formalized, such as for bringing new token issues to markets, holding secondary offerings, and raising funds from a crowd of token buyers.
6. Clarify requirements: Projects would benefit considerably from clarification on the conditions under which token sales need to register with a government agency, what information needs to be disclosed to the public and on what schedule, and the requirements for particular business processes such as KYC and AML.

A new US regulatory framework for tokens embodying the outlined principles would create an environment more conducive to American innovation and leadership of emerging high-potential blockchain markets.