There have been many issues when there is an attempt to conform cryptocurrency to current regulatory language. This fact was highlighted by an article written by Jonathan Chester, who is the CEO of Bitwage.
Juan Llanos, the fintech and regtech lead at Consensys, alluded to the gap in the perceptual understanding of key terms between members of cryptocurrency community and the regulators tasked with overseeing the virtual currency markets.
Mr. Llanos stated “At this point in time, all token distinctions and definitions come from the emerging crypto industry, not regulators. In the eyes of regulators, there are no clear-cut token definitions, only ‘activities’ and ‘products’ regulated under existing law. That is to say, several regulators are claiming jurisdiction over crypto assets inasmuch as these emerging assets fit their subject matter focus.”
Due to the unique manner in which cryptocurrency phenomena sit within the regulatory purview of individual regulatory agencies, the fundamental definitions pertinent to cryptocurrency often differ greatly between different governing institutions. “Some regulatory agencies have defined ‘virtual currencies’ as ‘monetary equivalents’ for purposes of money transmission and anti-money laundering; others have defined them as digital goods tradable in markets for purposes of ‘commodities’ regulation, yet others have defined them as ‘property’ for taxation purposes,” said Mr. Llanos.
Thus far, Mr. Llanos says that “the default position of securities regulators seems to be to consider them securities or investment contracts when they fit the conditions of the Howie test.” “The cyrptocurreny market has been relatively successful in explaining the fundamental differences between virtual/cryptocurrencies on one hand, and protocol, investment or application tokens on the other, depending on the rights they grant, the layer of technology where they reside, and the value or utility they provide” he adds. Mr. Llanos states that the dialogue has seen utility tokens increasing described as “consumer tokens, when the value they provide is predominantly consumptive, rather than speculative.”