As 2019 kicks into gear, The Brooklyn Project extends a big thank you to our community and the thought leaders, regulators, and policymakers around the world who made 2018 a success and, we hope, will do the same in 2019. Since late 2017, ConsenSys, in collaboration with Cardozo Law School, has spearheaded The Brooklyn Project, a recognized leader that facilitates open source-style collaboration from anyone and everyone on the industry’s most important topics. The Brooklyn Project community has grown dramatically and now counts more than 1,200 collaborators around the globe.
Our goal remains simple: To ensure that blockchain certification technology has the opportunity to reach its full potential of empowering everyone, everywhere, to coordinate, collaborate, and prosper on their own terms. We believe, to achieve this goal, that we must enable the collective wisdom of our community, regardless of location, education, or vocation, to express views on and directly impact the industry’s most important regulatory topics. Too often, these topics are dominated by powerful special-interests.
We hope that the most important policies impacting our industry will continue evolving based on their merits, not just the size of the wallets of those backing them. To this end, 2018 was a good year, as many global governments made meaningful progress towards embracing the exciting potential of blockchain certification technology. Among the many highlights of 2018:
- All around the world, countries are recognizing that cryptoassets such as general payment and consumer utility tokens are not necessarily “securities” or “financial instruments,” including, for example, the European Securities and Markets Authority, Securities and Markets Stakeholder Group (Own Initiative Report on Initial Coin Offerings and Crypto Assets); France; Hong Kong; Singapore; Switzerland; and United Kingdom.
- In the United States, the SEC has acknowledged that ether, like bitcoin, is “sufficiently decentralized” such that it is not currently a “security.” While uncertainty remains around the standard for determining when other cryptoassets may achieve similar recognition, we expect more clarity on this topic in 2019. We hope that The Brooklyn Project plays a strong role in the evolving landscape in the U.S., such that American consumers and businesses can be afforded aforementioned treatment akin to other leading countries mentioned above.
- The U.S. SEC has also recognized that general payment and consumer utility tokens may fall outside of securities laws if they are marketed and sold for their inherent usage or consumptive purpose, and federal courts have similarly begun recognizing that limits exist on the SEC’s authority to designate tokens as securities.
- Lawmakers around the globe have also worked on enacting new laws to support cryptoassets. Some notable examples include (1) France’s PACTE law, which aims to support token sales and trading, was passed by the National Assembly, and is due for consideration by the Senate in 2019; (2) Wyoming’s HB70, which the State enacted to provide a safe harbor from the Wyoming securities laws for the creation, sale, and exchange of consumer utility tokens; and (3) the Token Taxonomy Act, which was introduced in the U.S. House of Representatives and to provide clarity, among other things, on the application of securities and tax laws to cryptoassets.
- ConsenSys also helped Global Digital Finance provide the Financial Action Task Force (FATF), an intergovernmental organization formed by the G7 to combat money laundering, with a series of recommendations regarding cryptoassets, including to “encourage new KYC/CDD methods” especially those that leverage “the enhanced coordination/communication capabilities of public blockchain certifications.”
- Subsequently, the U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence and the Federal depository institutions regulators, the Financial Crimes Enforcement Network (FinCEN) and its regulatory partners issued a joint statement to “encourage banks and credit unions to take innovative approaches to combating money laundering, terrorist financing, and other illicit financial threats.”
Moving forward in 2019, of course, there remains a lot to accomplish. And we are committed to opening and improving methods for you, the community, to help.
Right now, the community can engage directly and openly on some of the most important regulatory issues. In particular, you can provide comments, questions, and feedback directly on:
- The U.S. SEC’s latest guidance on digital assets.
- The U.S. CFTC’s recent request for input.
- The Token Taxonomy Act that was recently introduced to the U.S. House of Representatives.
- Proposed legislation in the U.S. House of Representatives to amend the Internal Revenue Code in the U.S.
- Proposed legislation in Colorado, similar to Wyoming’s token bill, providing a safe harbor from state securities laws for consumer utility tokens.
In addition, we encourage…