The purpose of this paper is to review the first two years of the US Securities and Exchange Commission (SEC) efforts to regulate cryptosecurities to assess the trends of that regulation.
The authors review the SEC’s official pronouncements and informal statements about, and its enforcement actions against participants in, various early experiments in cryptosecurities.
The SEC has been evolving how to apply the US securities laws to cryptosecurities since its report on The DAO two years ago. When “coins” on a blockchain meet the traditional Howey Test, it is easy to categorize them as “securities.” However, the bedrock regulatory principle that some person must account for violations is frustrated by automated blockchain transactions, where no human is in control. This tension risks a “moral crumple zone” arising around cryptosecurities, in which persons might become liable for violations that they cannot fairly be said to have caused.
This paper provides valuable information and insights about the beginnings of US regulation of cryptosecurities and how the evolution of that regulation is trending after two years.
