Cryptoasset Regulation

The ARC Reserve Currency is as asset-backed cryptocurrency. In some jurisdictions it is may be classified as a security and fall within the boundaries of a regulatory framework.

This is likely to be the same for many asset-backed cryptocurrencies — or crypto-assets as we call them.

However, cryptoassets are borderless — a central element of blockchain technology is that Alice can sell to Bob without any restriction or third-party verification. But these cryptoassets must also comply with local regulations.

This creates interesting and difficult questions for the creators of cryptoassets, as well as the exchanges and purchasers of cryptoassets, for example:

— how do you know if a local regulator defines a cryptocurrency as a security, and what are the implications for this?

— how and to whom can you promote cryptoassets?

— who can buy and hold cryptoassets? (and who’s responsibility is this)

— how can you easily identify a cryptoasset vs. a cryptocurrency (see later)

and so on…

We have undertaken a meaningful amount of work to ascertain the correct approach to promoting and issuing the Arc Coin cryptoasset in different jurisdictions, but this will not be complete until we have reviewed every jurisdiction.

We have shared some of this work publicly in an open wiki project — for now we have updated regulatory comments on the Initial Coin Offering wikipedia page — and we will work closely with other industry participants and regulators to create an appropriate reference point and regulatory framework for issuing cryptoassets.

We have started to engage with lawyers and leading players in the asset management space, and hope to be able to make futher announcements later.

Please contact us at hello@arccy.org to join in.

We anticipate this collective effort should result in standards, guidelines and helpful insights to encourage the growth of cryptoassets, whilst protecting consumers.

Cryptoassets and exchanges

In the future, we predict there will be three types of exchanges:

1. Regulated Cryptocurrency-only exchanges
2. Non-Regulated Cryptocurrency-only exchange (i.e. no securities)
3. Hybrid exchanges: offering both.

Hybrid exchanges should offer the biggest liquidity (and best pricing) due to the volume of opportunities they will be able to list. However, users will need to be able to easily distinguish between regulated and non-regulated cryptocurrencies to enable hybrid exchanges to operate smoothly.

Also, exchanges may need to be able to identify the location of each clients, to facilitate compliance with local regulations (e.g. in the United States).

This illustrates just one ofthe many practical complexities that need to be addressed and resolved before cryptoassets will be able to be adopted widely and effectively.