It has been a long time coming, but in a sense the US cryptocurrency community is finally receiving clear language from regulatory bodies–and it isn’t good. The Wall Street Journal was the first to break the news that “The Securities and Exchange Commission has issued dozens of subpoenas and information requests to technology companies and advisers involved in the red-hot market for cryptocurrencies, according to people familiar with the matter.”
Jay Clayton, the Trump administration’s appointment to the top position at the SEC, has been rightly described as a “crypto Skeptic-in-Chief”. Bloomberg notes, “despite his free-market credentials, Clayton has embraced a go-slow approach.” Undoubtedly, Mr. Clayton and his SEC will do their best to make sure crypto’s fun in the sun ends soon.
Interestingly enough, however, is the fact that Mr. Clayton’s ally in the Commodity Futures Trading Commission (CFTC), takes a more genial approach to the new technology. J. Christopher Giancarlo, the current CFTF chair, noted in a Senate Banking Committee hearing, “Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response.”
The two differing opinions offer some insight into how the crypto community should (re)orient themselves regarding regulation. This is becoming an increasingly important venture, especially as the US has just recently demonstrated that outright bans are not out of the question. The Trump administration’s latest move was to ban the “petro” through executive order, Venezuela’s “official cryptocurrency”. To be sure, the ban involves motives beyond wanting to shut down cryptocurrencies in general. A senior US official commented ““Investing in the petro should be seen as investing in the dictatorship… The petro is a desperate attempt by a corrupt regime to defraud international investors.”
So what are crypto enthusiasts to do, especially as the private sector follows suit? The answer may very well lie in the COTI network, a blockchain initiative that both protects platform users and acts more as a commodity than a security-esque asset. Therein is the key for how blockchain based companies and their ICOs can avoid SEC-inspired shutdowns.
What is the COTI Network and How Does It Protect Investors?
COTI is a decentralized blockchain network with a coin–the COTI coin–specifically designed for peer-to-peer transactions, whether B2B, B2C, or C2C. The network is lightning fast, able to process transactions at a rate of 10,000 transactions per second, making it competitive with other major payment platforms like Visa, MasterCard, and PayPal. What’s more, the network has several key features that protect its users–something the SEC and CFTC will (hopefully) approve of.
The first key feature is an unbiased, objective user scoring mechanism called the “Trust Scoring Engine” (TSE). It assigns every network participant, whether a business or consumer, Trust Score based their transaction history, dispute record, and user ratings. In doing so, the TSE provides each party with a way to evaluate the entity on the other side of the transaction without compromising personal data and security. In addition, the TSE is used to calculate fees, with higher scoring users receiving lower fees. This incentivizes good behavior. The TSE protects COTI network users from malicious and unsavory parties while boosting network operability.
The second key feature is a COTI-denominated derivatives market. Here, users can use options and forwards contracts to hedge the price of COTI. This will give merchants a way to secure profits made from business transactions while also helping coin holders avoid the rampant speculation that is so prevalent in cryptocurrency markets today.
Third, and perhaps most importantly to regulatory bodies, the COTI coin will function as a medium of payment–more like a commodity than a security–not a speculative engine. One of the reasons that Bitcoin is used as a speculative vehicle is because it is slow and expensive. This discourages proper use and encourages reckless trading. In contrast, the COTI network will be able to function as a quick and secure medium of payment, making it more likely that people will use it as intended.