Cryptocurrency Roundtable on Capitol Hill

A forum of cryptocurrency experts and lobbyists will gather on Capitol Hill later this month to discuss regulation of initial coin offerings (ICOs). Their input will likely inform Congress’ regulation of ICOs.

Rep. Warren Davidson (R-Ohio) invited 32 industry leaders, lobbyists, and nonprofits, including Kyle Burgess and Beau Brunson of Consumers’ Research, to discuss what Davidson called “light touch” regulation for ICOs. The forum will convene on Tuesday, Sept. 25.

An initial coin offering is a fundraising mechanism a company can use to fund the development or release of a new cryptocurrency or cryptocurrency- backed project. An ICO provides non-institutional investors the ability to buy new cryptocurrencies, known as tokens, when startup ventures, first release them to the public to raise capital. An ICO is often compared to an initial public offering (IPO), where a company or project seeks funds from investors to kick-start a business in exchange for a share or ownership stake in the company. In a traditional IPO, the share’s value is based on the company’s valuation or “market capitalization” (i.e., the market value of the firm’s equity). The tokens issued in an IPO, however, do not necessarily derive their value from the issuing company’s valuation.

The forum will gather as Davidson prepares to introduce cryptocurrency legislation this fall.

William Hinman, director of the corporate finance division for the Securities and Exchange Commission, said in June that established cryptocurrencies such as ether and bitcoin do not operate like stocks and bonds and therefore should not be regulated like them.

However, while regulators have distinguished between cryptocurrencies and stocks, it remains an open question whether initial investments in burgeoning cryptocurrencies through ICOs should be regulated like issuances of securities. The Ethereum network’s sale of ether tokens in 2014 is widely considered the first ICO.

Ether’s decentralization, Hinman said, distinguishes it from a regular stock. He did not, however, weigh in on whether Ethereum’s 2014 sale constituted an exchange similar to an issue of securities.

SEC Chairman Jay Clayton said earlier this year that the ICO markets are trying to benefit both from the liquidity and marketing of a public offering and the lack of disclosure requirements of private fundraising.

Besides Consumers’ Research, other groups expected to attend the gathering include venture capital firms actively investing in digital tokens (Andreesen Horowitz and Union Square Ventures), token and traditional exchanges (Intercontinental Exchange, Kraken, Nasdaq, CME Group, Circle), non-profits (Coin Center), and other digital token and securities companies (Ripple, Harbor, CoinList).

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