According to a new report from the University of Cambridge’s Center for Alternative Finance (CCAF), one of the largest obstacles to the adoption of clear and consistent regulatory policies for the cryptocurrency industry is simpler than most might think. Rather than esoteric problems in legal codes and cultures, Cambridge pointed to the chronic lack of a standardized vocabulary as a big problem for the cryptocurrency industry.
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“A variety of terms are used, often interchangeably and without a clear definition,” the report said. “Even the term cryptoasset lacks a specific definition… cryptoasset and token can have different meanings depending on the context in which they are used.”
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“Regulators therefore face several challenges: first, to understand the nuances of the different terms, second, to identify the terminology most suitable for their regulatory objectives, and finally to define the terminology clearly and ensure it is used consistently in official statements.”
A “Multi-Dimensional Approach”
The report then went on to outline what it referred to as a “multi-dimensional approach” that divided crypto tokens into three categories. Payment/exchange tokens or cryptocurrencies were defined as “a means of value exchange,” security tokens are “an investment instrument,” and utility tokens “[grant] access to a digital platform or service.”
And indeed, many jurisdictions have already begun some of this work, although it has focused around what most would refer to as ‘security tokens.’ According to the report, 82 percent of the 23 jurisdictions it analyzed have distinguished cryptocurrency assets that have characteristics of securities from other kinds of crypto coins.
The paper also said that “this basic framework nevertheless needs to be refined to capture the complexities of a quickly evolving landscape.”
The paper also attempted to define ownership of crypto assets. “Proving ownership and exercising ownership rights of cryptoassets is dependent on knowing (and securely storing) the private key corresponding to the address in which the funds are locked,” it explained. However, “it is far from straightforward that (exclusive) knowledge of a private key is equivalent for all purposes to legal possession.”