7 Legal Questions That Will Define Blockchain in 2019
Jenny Leung is an Australian attorney (New York Bar admission pending) who will be starting as a blockchain attorney at Blakemore Fallon in 2019. Formerly, she was an attorney at the Australian Securities and Investments Commission (ASIC) and a privacy consultant at PwC.
The following is an exclusive contribution to CoinDesks 2018 Year in Review.
The SEC delivered some of its most important regulatory guidance of 2018 through conferences, interviews and personal statements. With each pronouncement, the SEC representative stated their views did not necessarily reflect the views of the SEC.
Looking back at the greatest hits, from Every ICO Ive seen is a security to If the network on which the token or coin is to function is sufficiently decentralized … the assets may not represent an investment contract and current offers and sales of ether are not securities transactions, the SEC has not officially confirmed any of these statements and has instead clarified that staff views are non-binding and create no enforceable legal rights.
Although the SEC does not make law, it may release official guidance on these areas that will effectively set up goalposts for blockchain networks to achieve sufficient decentralization.
Even if some level of decentralization could bring token sales outside of the SECs jurisdiction, was SEC Commissioner William Hinman correct in saying that the ethereum network is sufficiently decentralized? At what stage would offers and sales of a token transform from a security to a non-security?
6. Will a crypto ETF be granted?
The last remaining cryptocurrency-based ETF application, the VanEck/SolidX Bitcoin ETF, may see an answer on February 27, 2019. Some key questions that remain are:
- The scope of the term significant markets. To quote the VanEck SolidX Bitcoin Trust Presentation, As issuers we are concerned the SEC staff have created a moving target in their use of the word significant. The Staff have never provided guidance as to what significant means, enabling them to move their goal post indefinitely.
- The correct interpretation of Securities Exchange Act of 1934 Section 6(b)(5), which requires that the rules of the exchange are designed to prevent fraudulent and manipulative acts and practices. Does the exchange refer to the national securities exchange where the ETF would trade, or the bitcoin spot market? See SEC Commissioner Hester Pierces dissent.
- Whether the underlying bitcoin (or cryptocurrency) spot markets are indeed resistant to fraud and manipulation (and how the Department of Justices