Sam Bankman-Fried (SBF) has written a set of suggested standards for the crypto industry “while waiting for full federal regulatory regimes,” which were posted on the FTX Policy blog on Oct. 19. The post covers many of the questions facing regulators and operators, with specific reference to the United States at points. In particular, SBF outlined a plan for treating assets in the U.S. in regard to their status as securities or commodities. FTX will implement his plan, SBF wrote.
In the United States, SBF wrote, the FTX legal team will analyze assets using the Howey test, case law and guidance to determine whether an asset is a security or commodity. Non-security assets will be classed as commodities by default. Moreover:
“If we do find an asset to potentially be a security, we will not list it in the US unless/until there is a process for properly registering it.”
In addition, SBF supported the tokenization of equities in the traditional finance market on practical grounds. He also devoted considerable space to the need for customer protection and argued for knowledge-based investor qualification, as opposed to the income/asset-based qualifying system now in place.
Excluding assets that the exchange judges to be securities is no guarantee of peace with the U.S. Securities and Exchange Commission (SEC), however, as Coinbase discovered. When that exchange came under the scrutiny of law enforcement due to alleged insider trading, the SEC added securities trading violations to the charges against the accused. Coinbase chief legal officer Paul Grewal denied the exchange-listed securities, saying “Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange — a process that the SEC itself has reviewed.”
FTX is currently under investigation in Texas for securities law violations.
Related: ‘Secretly circulating’ draft crypto bill could be a ‘boon’ to DeFi
While his entire blog post is a reaction to the lack of regulation in the crypto industry, SBF remained upbeat about future developments. “I’m optimistic, for instance, that the Stabenow-Boozman bill would protect customers while also protecting economic freedom; and that federal regulators are making progress towards thoughtful frameworks,” he wrote in the tweet devoted to the document.
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