The friendliness of the United States of America with crypto startups remains dicey, because of not so properly defined regulations for the industry. This opinion was echoed of recent by Jeremy Allaire, the CEO of Circle that clarity of regulations on cryptocurrency from the U.S. Securities and Exchange Commission is key to unlocking the Crypto Market.
Also, there has been an exodus of crypto startups from the United States of America to countries such as Switzerland. Republican congressman Warren Davidson last year was meeting with a cryptocurrency entrepreneur in Massachusetts on the appropriate place to locate his crypto startup. He got a response from the entrepreneur that they are not sure if things would be right in the US so that Switzerland would be better.
The choice of crypto startups for Malta, Switzerland among others has been the conducive regulations that make their functioning possible. Unfortunately, a similar environment is not available in the united states, despite the budding effort of the country towards crypto adoption last year.
In recent time companies that created digital tokens and sold them through ICOs assumed that they would not be regarded as securities. However, when the regulators think otherwise startups can face legal issues as seen recently in the cases of Airfox Paragon and Basis.
Caitlin Long, a former managing director at Morgan Stanley who helped Wyoming pass new blockchain legislation last year stated that The SEC’s stance had caused a massive flight of startups to offshore jurisdictions. She noted that lawyers right and left tell clients not to issue tokens to US investors and not be domiciled in the country.
Righting The Crypto Regulations Wrong
While the country has not been conducive for crypto startups, considerable effort has been made in the late last year by congressman Warren Davidson in partnership with Florida Democratic congressman Darren Soto to release a bipartisan bill, the Token Taxonomy Act. This bill aims to amend the Securities Act of 1933 and the Securities and Exchange Act of 1934—the laws the government uses to define securities.
The primary goal is to define the criteria for when a cryptocurrency initial coin offering is security, to exempt some from the maligned designation. Also, the new bill will also feature criteria for exemption from security status such as the blockchain platform the token runs on has already launched, the control of token supply by a person or group among others.
A blockchain legislation advocate Caitlin Long noted that The Token Taxonomy Act would be a significant advance if it were to pass. The bill is still undergoing reading in the Congress and afterwards, go to the financial service committee for review before it becomes a law.
The success of the bill is key to making the United States a haven for crypto startups. The chance of its success is not and the period it will take is also unknown. However, at the moment the U.S. is not suitable for crypto startups.