Public Policy

Cryptocurrency Market Caps

Public Policy Framework

• Guarding Against Illicit Activity
• Financial Stability
• Protecting the Investing Public

Authorities need to decide whether to isolate, regulate or integrate crypto-assets and their associated activities. Mark Carney, Governor of the Bank of England, March 2, 2018

Guarding Against Illicit Activity

• Tax Compliance and Reporting
  • Definition: currency or property? Most jurisdictions define cryptocurrency as a property
  • Tax treatment - Mining is an income
  • Reporting: Individuals, brokers, 1099-Bs & Report of Foreign Bank and Financial Accounts
• Bank Secrecy Act
  • KYC (Know your customer) and AML (Anti money laundering) and CTF (Counter terrorism finance)
  • Report obligations on large transactions (> $10,000)
• Challenges
  • Pseudonymous Addresses
  • Privacy Coins & Mixers or Tumblers
  • Compliance and Reporting
  • Crypto to Crypto Transactions
  • Decentralized Exchanges
  • Dark Markets
  • State Actors

Financial Stability

• Capital Control: RMB -> Electricity -> Bitcoin -> Dollar
• Crypto Leverage
• Blockchain Market Infrastructure
• Central Bank Digital Currencies & Stable Value Tokens

Protecting the Investing Public

• Crypto markets readily subject to fraud, scams, and manipulation
• Custodial Arrangements - Exchange and Wallets
• Definitions – Securities, Commodities or Derivatives?
• Tracking Beneficial Ownership of Crypto Assets
• Remediation of Non compliant ICOs & Exchanges
• Personal Data Privacy

Investor Protection

Investor Protection goes beyond Consumer Protection:

• Investors get Full & Fair Disclosure from Issuers
• Fraud & Deceptive Sales Practices Prohibited
• Secondary Markets Promoted w/ Price Transparency & Anti-Manipulation
• Advisors’ Conflicts of Interest Disclosed and Minimized

The Howey Test (1946):

• Is it an investment of money or assets?
• Is the investment in a common enterprise?
• Is there a reasonable expectation of profits?
• Is it reliant on the efforts of a promoter or others?

The Duck Test

“When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.” James Whitcomb Riley, poet

Public Policy Development

1. Messaging - “Make America Great Again”
2. Politics - Coalition building
3. Analysis