- Cardano founder Charles Hoskinson claimed that stablecoins and RWAs can’t seamlessly integrate with existing securities and commodities laws.
- He recommended creating a new security classification for digital assets, particularly RWAs.
The future is looking bright for digital assets, as the United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) recently released harmonized guidelines for their regulation. The public sees it as the end to their turf war when it comes to oversight on cryptocurrencies and tokenized real-world assets (RWAs). It also marks the end of confusion among industry participants regarding regulatory compliance.
Charles Hoskinson, founder of Cardano (ADA) and CEO of Input Output (IO), believes there are still gaps that authorities need to address. He suggested exploring a new category focused specifically on RWAs to seamlessly plug stablecoins and RWAs into the current US regulatory framework.
Introducing a New Category for RWAs
During a conversation with David Gokshtein, founder and chairman of Gokhshtein Media, Hoskinson indicated that the existing US securities and commodity laws are outdated. Hence, he outlined ways to integrate digital assets into their system.
“Let’s create a new category of security, a digital security for real-world assets,” Hoskinson told Gokshtein. “Let the blockchain be a disclosure vehicle for that, and then, create a model where you can be decentralized, but be a security.”
Using Coinbase as an example, Hoskinson explained that the proposed framework will enable Brian Armstrong to compliantly list stablecoins without worrying whether they are securities. Additionally, the data in the blockchain will already serve as a disclosure tool, thereby reducing red tape and paving the way for efficiency.
Integrating Digital Assets in an Outdated System
Hoskinson claimed that the current securities laws are 93 years old. Their provisions never envisioned the ongoing transformation of the financial landscape, especially the emergence of various types of digital assets.
The Cardano founder found a problem in how regulators and lawmakers no longer pushed for amendments to securities laws, and instead simply proposed handing over the oversight of digital assets to the CFTC. He pointed out that the move raises new issues because the agency lacked sufficient protocols to regulate markets as the SEC does.
Hoskinson recommended that if the CFTC wants to treat all digital assets as commodities, it should establish a “miniature SEC” within itself. Meanwhile, he identified problems with how the pending Clarity Act threatens to impose a “securities by default” label on digital assets unless they pass the “mature blockchain test.” Now, the problem with this process is that there are no clear rules or standards for such a test.
Given these factors, Hoskinson recommends a bespoke legal classification that would allow the crypto industry to move beyond the limitations of rules that former lawmakers and regulators never tailored for decentralized markets from the start.
