On Crypto Regulation and Staying Above Board – Example Letter to the SEC

Merriam-Webster defines FUD as an abbreviation for “fear, uncertainty, and doubt.” The entry in Wikipedia notes it as a “strategy to influence perception by disseminating negative and dubious or false information and a manifestation of the appeal to fear.”

If you’re in the crypto space for any amount of time, you’ll no doubt have come across some of this in some shape or form.

One of the things we hear all the time (and what we’re trying to help address here at YEN) is how to navigate what FUD really is and what we can really take at face value?

With such a nascent space, there is bound to be a little fear, a little doubt, and a decent helping of uncertainty, especially while we all “sort everything out.”

But what happens when the one who try to control the FUD are the ones that actually end up spreading it?

First time? Hang on…

If 2017 was the year of the ICO, one could argue that 2019 will be the year of trying to go back to 2017 trying to regulate the Wild West days.

Stories are coming out with more frequency about regulator actions against the likes of Kik and Eric Powers. Going to any type of crypto-centric conference these days will not doubt have a session (or an entire track) dedicated to regulation and compliance.

Even some of our illustrious community members went to Consensus 2019 and noted the breakout room holding the regulation track was consistently the most attended! And you could tell by the temperature in the room that this was something that people were hungry for!

The narrative in the room was one of increased scrutiny coming into the space and one panel speaker even shared an obvious (and ominous) warning:

Someone will be made an example of.

If that’s not fear, uncertainty, and doubt then I don’t know what is!

Guidelines or Rules?

I had a few moments to speak with a few others in attendance and the sentiment was shared; a general uneasiness on how best to proceed with building a company and business.

On one hand, the crypto and blockchain space is as exciting as it has ever been! We, like many of the “true believers,” believe that this technology will be one of the most pivotal in our lifetimes! There are too many great projects to name with amazing people behind them – and more entering the space daily!

But on the other hand, no one really knows how long those “good times” will actually last; it’s like trying to play a game but you don’t how to keep score and the ones controlling where, how, and when the game is played won’t tell you us the actual rules! Please, just a little guidance can go a long way!

This is especially challenging for folks who are actively building financial products in the space today (like us!) – the demand for better community organizing tools for crypto-centric projects is only growing (in addition to a completely new crypto-centric social platform) and so we’re doing our very best to hold, in tension, our desire to push the boundary(ies) of what can be done as well as stay “above board” with the many regulatory bodies that we may (inevitably?) interface with, like the SEC, OFAC, FinCen, state-specific legislatures, and anyone else who wants to join the proverbial party.

The more the merrier, from our perspective! In fact, we’ve even got a dedicated Slack channel to discuss amongst the team:

A new, exciting Slack Channel.

The difficulty for us isn’t new or unique – most of the new crypto projects we’ve spoken share the same anxiety and frustration: It is simply too hard to get a clear and obvious (and tactical) definition of how to best interpret and implement the laws that are currently being minted into existence.

So what do progressive, daring, inventive and legally-conservative products and companies do in terms of (future) compliance? Simple: We do our very best to balance the limited time and resources that we have to commit to these issues, stay on-top of new changes within our industry, and build relationships with folks that are much smarter and more knowledgeable than we are.

This is a slight “balancing act” in some regards, but, we want to always ensure that we’re on the “right side” of the law from Day #1. Some organizations can do this by having a full-time staffed compliance member of the team (or department) while most others (e.g. smaller startups) will do as best as they can with what they have.

Yes, it is very scary to think that we may spend years building a workable (and desirable!) product only to be found on the “wrong side” of what is deemed acceptable and that we may have to pivot or even scrap years of work – this is simply the “cost” of doing business in these exciting (and unregulated) industries!

And if you’re building anything in this space then you’ve also made that same bet! The wonderful thing is that we’re not alone and there are a few things that can help you stay one step in front of the regulation (and regulators).

Get some help, seriously.

For instance, we’ve decided to connect directly to smart folks who are deeply obsessed with all things legal around cryptocurrency and blockchain, professionals who can give us much more guided information and data around what is acceptable and what isn’t.

By simply talking openly about these issues (like this blog post) we can help facilitate more dialogue about these important and pressing topics.

You see, we want to talk to as many people as we can to get a better idea of how to proceed and one of the things companies may not know about is the ability to contact and get feedback from the SEC directly on their project!

If you visit their new FinHub site, you can put in a request to talk to someone at the SEC about your project (FinCEN also has a page up as well although our experience has been a slower one there).

We recently did exactly this and we wrote up a letter explaining our future plans to see if we could get some clear guidance on next steps for us.

Feel free to use this!

You can read the full letter below (and use it for your own needs!):

This is one step in the journey we wanted to share with everyone and we will continue to share what we can going forward as we go through the process.

If anyone reading this has any insight to offer, we’d love to chat (ping me directly)! While this post is focused on US-based regulatory bodies, we know the likes of GDPR and country-specific regulations are waiting for us too.

It won’t be easy but we wouldn’t want it any other way.