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Regulators turn their sights on virtual currencies

On behalf of Law Office of Clifford J. Hunt, P.A. posted in regulatory compliance on Friday, April 27, 2018.

In the last few years, cryptocurrencies have been big news and big business in Florida. Although they have gone fairly unregulated thus far, private sector experts and government regulators have fueled speculation about how government and business will ultimately regard cryptocurrencies — and how they may be regulated. In some instances, cryptocurrencies may be treated as a currency, and in others, they may be seen as securities and subjected to regulatory compliance.

In a New York Times interview, Gary Gensler — a former Goldman Sachs partner and top financial regulator during the Obama administration — voiced his own opinions about how he envisions blockchain technology and cryptocurrencies will be treated by government regulators. Gensler believes that Bitcoin and similar currencies will escape securities regulation. Other such virtual currencies include Litecoin and Monero.

On the other hand, based on how they are controlled and issued, Gensler believes that a strong case can be made that the Ripple and Etherum virtual currencies could be categorized as noncompliant securities. Gensler’s analysis is based on the fact that Bitcoin-style currencies are decentralized and outside the control of a single entity. He notes that Etherum is also becoming less centralized and could sidestep the securities designation.

Gensler believes that Ripple — and similar virtual currencies — are the most likely targets for federal securities regulation. This is based on the fact that Ripple, itself, holds most of the Ripple tokens. If the Securities and Exchange Commission decides that such virtual currencies are indeed noncompliant securities, U.S. citizens would be prevented from trading them on certain exchanges. This, in turn, could have the effect of driving down the currencies’ value across the globe.

Source: New York Times, “A Former Top Wall Street Regulator Turns to the Blockchain,” Nathaniel Popper, April 24, 2018

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