British Legal Body Creates New Policy Proposals to Regulate “Diverse” Cryptocurrencies

Regulation has become a subject of interest in the cryptocurrency industry once more. Several regulatory bodies have turned their focus to cryptocurrencies in hopes of implementing progressive frameworks.

In the United Kingdom, a legal commission has proposed a new form of classification for cryptocurrencies, encouraging lawmakers to push for its passage.

Cryptocurrencies as “Data Objects”

Earlier this week, the Law Commission for England and Wales – an independent legal body set up by the British Parliament – announced that it is reviewing existing legislation surrounding digital assets based on a request from the British government. The official announcement pointed out that the exercise aims to accommodate specific changes that could arise due to the use of digital assets.

In its proposal, the Law Commission highlights that cryptocurrencies are among the most diverse and multifaceted assets globally. The legal body pointed out that it would be impossible to build a singular, narrowed view of regulating traditional cryptocurrencies – much less subgenres like digital tokens and non-fungible tokens (NFTs), amongst others. Pointing out the possible applications of digital assets, the Law Commission mentioned payments, proof of identity, proof of ownership, and even stores of value.

With these diverse functions, the Law Commission believes it important to build broader recognition and legal protections for digital assets. This way, it argues, individuals and businesses looking to explore this sector would finally have a structured framework through which they can operate.

As part of its proposal, the Law Commission posits four key solutions. The first is to define a legal category under which digital assets would be recognised. So far, the Law Commission believes categorising cryptocurrencies as “data objects” would be a solid solution.

Secondly, the Commission proposes creating several options for developing and implementing these data objects into the current legal framework. The legal body also suggests that the government clarifies the laws surrounding digital asset ownership and control and creates a set of rules that guide digital asset transactions and transfers.

While these are simply recommendations, it would be interesting to see how the government – particularly the Financial Conduct Authority (FCA) – responds to this. The FCA has been in charge of building crypto regulations for the territory for over two years now, but it hasn’t made much progress besides building a tax regime to ensure that cryptocurrency transactions and trading are properly taxed.

The SEC’s Shock-And-Awe Approach

While the Law Commission is helping the British government with policy proposals, other regulators appear to be taking a much different approach to the subject.

Institutions like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been tasked with creating rules guiding the issuance and operation of cryptocurrencies, but they’ve been stuck in a cycle of regulation through enforcement.

Last week, the SEC ruffled feathers across the industry when it announced charges against Ishan Wahi – a former Global Product Manager at Coinbase – and two of his associates for allegedly violating its Securities Act after trading assets on the crypto exchange.

The U.S. Attorney’s Office had already indicted Wahi and his associates for insider trading after they were accused of using Wahi’s knowledge of coins to list on Coinbase to profit off their price movements. The men were accused of capitalising on the famed “Coinbase Effect”, but the SEC’s securities violation charges caught the market by surprise.

In its indictment, the agency explained that several of the coins that Wahi and his associates had traded were securities. The SEC now appears to be going after Coinbase, claiming that the broker had knowingly provided these “unregistered securities” to American citizens.

There is no doubt that this could have massive ramifications for the market. By labelling cryptocurrencies as securities, the SEC could directly bring them all under its supervision. However, considering that the agency already claimed that Bitcoin and Ethereum aren’t securities, the merits of its claim that these nine new coins are suddenly securities is quite perplexing.