Sam Bankman-Fried just published his thoughts on the future of regulation in crypto.
It's structured as a set of self-governing community norms, but it also serves as a suggested framework for regulators to adopt.
Here's what it recommends:
1) On-chain blocklists maintained by US Treasury and updated in real time.
Transitive property applies, so funds must be frozen upon receipt, but receipt of sanctioned funds can be cured by sending to a "burn" address.
2) On-chain lists of hackers who violate a "5-5" norm, which limits the payout from hacks to the lesser of 5% of the hacked amount or $5 million.
Hackers who violate the norm (demand more) are put on a blocklist.
3) FTX to police their listings based on their own analysis of whether specific tokens are a securities (applying Howey test and case law).
4) Adoption of tokenized equities, which could potentially improve stock settlement.
Note this is more a request to expand tokenization to stocks rather than a suggestion about regulating existing digital assets.
5) Standard token disclosures and crackdowns on misleading marketing.
Using a "suitability" test to limit retail use of crypto, ideally with knowledge-based quizzes rather than wealth/income requirements.
In other words, protect users from themselves.
6) Registering front-ends as broker-dealers requiring KYC.
Smart contract code and pure on-chain activity still unpermissioned.
7) Backing all stablecoins at least 1:1 with equivalent fiat instruments.
No crypto-collateralized or undercollateralized stablecoins.
There's a lot to unpack here. Will offer my thoughts in the coming days.
The original tweet and blogpost:
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