TYPES OF CRYPTOASSETS All tokens are merely code

THE EXISTING FINANCIAL REGULATORY FRAMEWORK • Securities and Exchange Commission (SEC) • Commodity Futures

THE LIMITS OF SEC JURISDICTION • Jurisdiction over crypto-assets that are securities: (Howey test;

THE LIMITS OF CFTC JURISDICTION • Jurisdiction over derivatives using cryptocurrencies. • But authority

“MIND THE GAP!” Neither the SEC nor CFTC regulates the distribution of a crypto-asset

ENFORCEMENT CHALLENGES • Both SEC and CFTC are currently using their limited authority to

FINCEN • Applies AML and KYC requirements to virtual currency market • But enforcement

FEDERAL RESERVE BOARD Chairman Jerome Powell in 2018: “We don’t have jurisdiction over cryptocurrencies.

FEDERAL RESERVE BOARD Chairman Jerome Powell in 2019: “LIBRA raises many serious concerns regarding

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TYPES OF CRYPTO-ASSETS All tokens are merely code, but there are different types. . . • Payment token—a means of payment or exchange (a cryptocurrency) • Asset or equity tokens—a debt or equity claim, or beneficial interest in, an issuer or the enterprise of others • Utility or consumer tokens—a right to use or have digital access to a blockchain-based application or service

THE EXISTING FINANCIAL REGULATORY FRAMEWORK • Securities and Exchange Commission (SEC) • Commodity Futures Trading Commission (CFTC) • Financial Crimes Enforcement Network (FINCEN) • Bank Regulators (OCC, FDIC) • Federal Reserve Board • State Regulation

THE LIMITS OF SEC JURISDICTION • Jurisdiction over crypto-assets that are securities: (Howey test; distribution questions) • But the most widely traded crypto-assets are not securities

THE LIMITS OF CFTC JURISDICTION • Jurisdiction over derivatives using cryptocurrencies. • But authority over the cash market is very limited • Fraud and manipulation claims • Retail leveraged transactions

“MIND THE GAP!” Neither the SEC nor CFTC regulates the distribution of a crypto-asset that is not a security or the trading of such assets in the cash market. . . which is most of the trading today

ENFORCEMENT CHALLENGES • Both SEC and CFTC are currently using their limited authority to step up enforcement • But this cannot fill the gap: o Statutory authority is not sufficient o Inconsistency may arise where authority isn’t clear o Resources are not sufficient 7

FINCEN • Applies AML and KYC requirements to virtual currency market • But enforcement would be greatly enhanced by general oversight and transparency

FEDERAL RESERVE BOARD Chairman Jerome Powell in 2018: “We don’t have jurisdiction over cryptocurrencies. We have jurisdiction over banks. ” (House Financial Services Committee Hearing, July 18, 2018)

FEDERAL RESERVE BOARD Chairman Jerome Powell in 2019: “LIBRA raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability. These are concerns that should be thoroughly and publicly addressed before proceeding. That’s why at the Fed we’ve set up a working group. . . ” (House Financial Services Committee Hearing, July 10, 2019)