Cryptocurrency Industry Insiders Eager for Regulatory Clarity, Foley Survey Finds

28 June 2018 Innovative Technology Insights Blog
Author(s): Patrick D. Daugherty Kathryn M. Trkla

A decade into the cryptocurrency revolution, the digital currency’s future is awash with questions from regulation and enforcement to exactly what type of asset they are to the impact of volatility in market values.

Against this backdrop, Foley & Lardner LLP surveyed a range of executives and investors to gauge their views on the use, risks and regulation of cryptocurrencies. One key theme to emerge was that despite strong libertarian views that permeate the cryptocurrency industry, the majority of those surveyed see the value of thoughtful regulation. Most respondents (84%) believe initial offerings of cryptocurrencies should be regulated in the United States. In addition, 68% want regulations for ongoing purchases and sales of cryptocurrencies, and 55% say it’s needed when it comes to paying for goods and services.

The survey also found respondents navigating an unclear legal environment. Nearly three-quarters (72%) say that the cryptocurrency industry does not have a well-grounded understanding of the application of existing regulation of financial markets or financial services. Their uncertainty is understandable as federal regulators have asserted their grounds for regulating aspects of cryptocurrency activities, but sent some mixed messages in the process. However, a recent speech by SEC Division of Corporation Finance Director William Hinman provided valuable insight into factors that could persuade the SEC that a particular token offering is, or is not, a securities offering.

Additional key findings that emerged from Foley’s research include:

  • Respondents favor self-policing, with 86% saying the cryptocurrency industry should develop common voluntary standards. Additionally, 89% say the industry should explore implementation of standards through formalized self-regulation, with most believing that any model of self-regulation should be subject to regulatory oversight.
  • More than half of respondents (58%) are willing to take on legal risk to invest in or develop cryptocurrency businesses.
  • A strong majority (72%) support the opportunity to invest in exchange-traded funds holding cryptocurrencies.
  • Respondents are watching a range of potential risks, with hacking and security breaches seen as the most pressing threats to the viability and growth of the cryptocurrency industry. The theft of cryptocurrency tokens is viewed as a strong or very strong risk by 71%, and 61% said the same of the theft or “ransom” of data.

For more information and to download the 2018 Cryptocurrency Survey report, please click here.

Patrick Daugherty, Kathryn Trkla and Allison Charney are partners at Foley & Lardner LLP and members of the firm’s Blockchain Task Force, which advises established and startup businesses on the full range of issues arising in the cryptocurrency space. Practitioners from multiple legal disciplines counsel clients on such issues as initial coin offerings and blockchain fund formation; investing in cryptocurrency; use of distributed ledger platforms for trading of cryptocurrencies and other instruments; and the proper regulatory classification of these transactions.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.