2019 was another year in which crazy-get-rich cryptocurrency schemes led not to #WhenLambo but instead to #WhenHandcuffs. Stories about disappearing crypto and government crackdowns were among the top news stories about blockchain regulation. But, 2019 was also a year in which the foundations for legal order may have been laid.
Here are 2019’s top 10 stories about developments in blockchain regulation:
10. American Footballer Falls Afoul of Feds: Former professional football player and co-owner of the Minnesota Vikings (hopefully, not Lizzo’s new man) is charged with violating federal law in connection with the alleged operation of a “shadow banking” service for cryptocurrency startups. According to news reports, Fowler is planning to plead guilty at a hearing in January.
9. HMU on KIK: You may know it as the way to DM your BAE on the down-low, but the U.S. Securities and Exchange Commission (SEC) claims KIK went too low in issuing $100 million worth of unregistered crypto tokens. KIK claimed the SEC was “playing dirty” and “trying to make [KIK] look bad.” Insert smiley face emoji here.
8. Disappearing Act: A team of lawyers and accountants began unraveling the mystery surrounding the untimely death of Gerald Cotten in 2018 and the disappearance of more than $100 million in cryptocurrency held by Cotten’s Canadian crypto-exchange, Quadriga. A prediction for 2020: the only people who will see any real money from the unwinding of Quadriga will be the lawyers and accountants and you can bet they won’t be paid in crypto.
7. Wyoming Stakes Claim: It may be a state where the buffalo roam and the deer and the antelope play, but Wyoming passed a series of laws aimed at making it a utopia for blockchain-based businesses. Seldom was heard a discouraging word, except about that hell pit of blockchain regulation, New York state.
6. Rise of Enterprise Blockchain: Although it’s not purely legal news, the emergence of enterprise blockchain solutions, including from Blue Chip firms such as IBM, Amazon and Oracle, carries the potential to change the narrative about blockchain regulation from stories about cryptocurrency shenanigans to stories about fraud reduction and trust-building.
5. British Barristers Bless Blockchain: The U.K. Jurisdiction Taskforce of the Lawtech Delivery Panel issued a report that concluded that cryptocurrency should be considered legal property, which means that it can receive the same treatment under the law as other assets in circumstances such as bankruptcy or theft. The panel also recognized that smart contracts can be treated as legally enforceable in the same manner as other more traditional contracts.
4. China Continues to Cool Crypto Flame: China’s central banking authority announced a further crackdown on cryptocurrency. The People’s Bank of China said in a statement that “the issuance, financing and trading of virtual currencies involve multiple risks.” The crackdown comes shortly after officials in Shenzhen announced a similar crackdown and as the RBOC prepares to offer its own cryptocurrency.
3. SEC Acts on Token Offering; Noone Goes to Jail: The SEC qualifies a token offering from Blockstack, which operates a decentralized computing platform. The approval of Blockstack’s $40 million token offering was the first time that the SEC qualified an offering of blockchain digital assets, and demonstrated a path to compliance.
2. SEC Releases Long-Awaited Guidelines: The SEC announced a framework for analysis of digital assets and at the same time issued a no-action letter for tokens offered by a charter jet service. An article in Harvard Law Review described the framework and no-action letter as indicating “that the SEC is open to excluding some blockchain-based digital assets from securities regulations. This development is meaningful because it marks a shift away from the former uncertainty, which was likely a function of the SEC’s desire to promote innovation.”
1. Bitcoin Bounces Back: It’s not a pure regulatory story, but to many people Bitcoin = blockchain. As long as Bitcoin gives the appearance of being a means for get-rich schemes and as long as it has value to scammers, it will drive a narrative that associates blockchain with illegal behavior. After being on the ropes at the end of 2018 when it was valued at about $3,700, the price of Bitcoin grew about 97% in 2019, ending at a price over $7,000. Bitcoin remains a fascinating experiment in an asset that is, at its best, a currency alternative and an investment opportunity but, at its worst, a tool for fraudsters.