Trump wants a bill on market structure by August. Will industry leave it?

President Donald Trump, who received at least $ 13 million Crypto companies and managers for its inauguration, urges a Congress occupied to obtain a bill that consecrates clear rules For the cryptography industry, adopted before his departure for the recess of August.

The problem is that industry does not know what it wants.

The initiates have developed multiple paths to regulate the industry, ranging from light adjustments of laws in terms of existing securities to those withdrawing the majority of the cryptographic industry from the jurisdiction of the Securities and Exchange Commission. He spent months Traffic research documents And Ploch his ideas with regulators.

The most popular theories use interpretations of the Howy test and how they should be applied to the crypto, if applicable. The Howey test is the product of a decision of the Supreme Court taken in 1946, decades before the invention of cryptocurrencies, in order to determine which transactions should be subject to the securities laws. He indicates that an asset is a guarantee if there is a money investment in a joint company awaiting profits drawn by the efforts of others.

The SEC previously used the Howey test as justification of its wave of application measures against industry. However, the industry estimated that it was too zealous to call digital asset titles under this legal precedent.

The securities laws, which could always apply to cryptographic tokens at an early stage, require various reports and audits considered by many in the cryptographic industry as too complex and expensive for entrepreneurs at an early stage. This is why most theories design different ways for at least certain cryptographic projects existed outside their competence.

But over time, the disagreement between the different crypto factions on specific rules has only made itself more rooted, and a formerly organized cryptographic industry has been found in a university conflict responsible for details.

The dynamics left members of the congress and the president, who, in January, may have thought that the development of cryptographic legislation would be simple, to have to choose winners and losers in this horse race. And if the industry makes things too difficult, it could grip its best chances of obtaining the “regulatory clarity” for which it worked so hard.

The arguments concerning the following legal theories will probably consume a large part of the political conversation for the next three months. Here is how the battle lines are currently traced.

Find out more: Coinbase aims to jointly adopt the structure of the market and the legislation on the stablecoin in the congress

Don’t change anything

First, it is possible that the Howey test remains a case “facts and circumstances”-that is to say that its request to the crypto is not codified in law and is applied on a case-by-case basis. This could be better described as codifying the status quo.

Take John Reed Stark, former head of the DRI Internet application office during the first round table of the dry crypto working group earlier this year. “Although it is an interesting academic exercise to debate the Howy test, reality is that the dry is granted enormous latitude with regard to its jurisdiction,” he said. Dry Democrat Commissioner Caroline Crenshaw seems to agreeJust like many more securities lawyers than the industry calls “anti-Crypto”.

However, the president of the SEC, Paul Atkins and the republican members of the congress in charge of the relevant committees for the creation of a bill on the structure of the market, seem distinctly against this approach. Atkins said During a round table of the dry working group last week, the existing frame “needs attention”.

This approach seems very unlikely to win.

Nothing is a transaction in securities without express written contract

A small but free of law of cryptographic lawyers maintains that most cryptographic transactions are not transactions in securities because they imply an activity which is not part of the field of a typical securities contract. This first iteration of this argument surfaced in the context of 2020 Training boxwhere Ripple said that there were “essential ingredients” for a transaction to be considered as an investment contract which was not respected, as Obligations after sale That the token promoter must the investor so that the buyer shares the profits.

Although the theory of “essential ingredients”, a term created by Ripple, did not succeed in court, a similar argument Made by many Crypto lawyers in favor of the lightest regulations indicates that the Howey test should not apply to most cryptocurrency transactions because they do not imitate transactions similar to those observed in traditional titles.

Part of what is innovative about the crypto, according to these lawyers, is the unique relationships established between different types of token holders, such as guard or jalitude. And because these types of transactions may be outside what the Supreme Court could have imagined when creating the Howey test, where the Congress could have imagined when creating the Securities and Exchange Act, they should not apply. “Given the uncertain basis of such inclusion, it is likely that Congress did not intend to include cryptocurrencies in the class of titles requiring the registration of the dry,” said Professor of the University George Mason JW Verret in a newspaper published last year.

Find out more: How did Ripple sold Trump on XRP in a cryptography reserve? By pushing for Solana

The issue of tokens is a securities contract; Secondary market transactions are not

There are also lawyers who argue that the emission emission is a transaction in securities, but that almost all other transactions are not subject to securities laws. Lewis Cohen, in his testimony Before the senatorial banking committee in February, described this as an “auxiliary asset framework”.

This argument, like The Prior, has a considerable popularity because it does not require modifications specific to crypto-specific to the securities law or exchange, but rather interprets existing laws for an application to the cryptographic industry. It is also a fairly light regulation method because it classifies almost all cryptocurrency transactions outside of emissions as non-security transactions, and therefore not something that triggers the requirements of reports or arduies.

All transactions on decentralized blockchains are not subject to the securities law

The fourth camp, around which some of the most powerful players in industry such as A16z Crypto, Coinbase, Aave, Eigenlayer, Optimism and many others are merging, argues that all transactions taking place on decentralized networks are not titles.

Part of the reason why these organizations gain ground with their legal theory is because it is a way of thinking that was first proposed in a famous Speech 2018 By the former director of funding for regulator companies, William Hinman, who is currently an advisory partner at Andreessen Horowitz, when he declared that Ethereum was sufficiently decentralized to fall outside the jurisdiction of the dry. It was later adopted By Hester Peirce in 2019, he therefore already has the momentum of the main securities regulator in the country.

Returning to the present, this current theory is “inspired” by the Howy test, explains that the Advocate General of Delphi Ventures Sarah Brennan, who recently co-author a paper Articulate its version of the frame with the decentralization research center – a similar to a framework two sources said A16z Crypto circulated on the hill. The document itself does not mention Howey by name, but a new law centered on this new principle would have the practical effect of replacing Howey, in particular the part dictating that investors in security are based on the efforts of others for profits.

The framework, according to these sources, had an influence on the members of the Congress written a bill on the structure of the market.

“Think of what you might have thought years ago, with this open source community, Cyplerpunk Vision where, in the infrastructure layer, you created technology without authorization. It is a public good, and the only value accumulation center is the token, ”explains Brennan. “Then there are web companies 2 with a token…. It looks like a regular thing, vanilla, titles type. ”

However, although this approach may seem attractive in a vacuum, the delimitation line between a centralized and decentralized network continues to be a motion target.

Find out more: Is the dry about to reverse its position on Howey?

Following steps

Sources have said that at least the Chamber’s Financial Services Committee – one of the four Congress Committees involved in the formatting of market structure legislation – provides for Release an invoice project At any time by early June. After that, the dry and, if we receive a jurisdiction over the crypto, the CFTC would go through a regulatory process to refine how it will interpret and apply the law. These regulators have not yet received a strict calendar by which Act, although the president of the Sec Atkins and the incoming president of the CFTC Brian Quintenz have shown an eagerness to give clarity to the cryptographic industry.

The publication of a bill on market structure will inevitably put many of the differences between outdoor cryptographic lawyers. The general councils for most of the main crypto projects and industry associations in space will submit letters of comments, writing tweet threads, perhaps even by asserting their arguments on the stages of the cryptographic conference and DC

If legislation adopts a framework that some consider it too restrictive, certain projects may have trouble complying with the regulations. If legislation adopts a lighter approach, problematic projects may be authorized to infiltrate the cryptography market, causing large instability and reputation damage.

“We have to take a decentralization test which is effective and sufficiently robust so that we did not end up with a pile more FTTS and a pile of Terras more,” said Connor Spelliscy, executive director of the decentralization research center, a member of the fourth camp. “Not only will it harm many people, but we will probably never recover in a repair as an industry.”