With the recent collapses of crypto lenders such as Celsius Network, Voyager Digital, FTX, BlockFi, and others, it’s been an extremely tumultuous year for cryptocurrencies. But although almost 15 years have passed since the birth of Bitcoin in 2009, the U.S. still lacks a coherent framework for regulating cryptocurrencies and digital assets.

So what makes effective crypto regulation so challenging? And what might a better way of regulating digital assets look like?

A central issue complicating attempts at crypto regulation over the past decade is confusion over whether cryptocurrencies are securities or commodities, which determines if they are regulated primarily by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). While regulators have traditionally applied the Howey Test to determine regulatory jurisdiction in the past, it has proven difficult to use this method for digital assets. Apart from Bitcoin, which is now widely understood as being a commodity, regulators have flip-flopped on the classification of other cryptocurrencies, including Ether – the world’s second largest cryptocurrency.

This lack of clarity can have huge consequences for crypto companies, who are at risk of steep penalties from the SEC if they are deemed to be unregistered securities. It also threatens to stifle innovation and growth within the burgeoning crypto industry, which could drive companies towards markets outside the U.S.

On this episode of Ascend Radio, lawyer and cryptocurrency expert Sean Gellis, who leads a Florida-based legal and consulting firm focused on GovTech and regulation, joins Paul Leavoy to talk about why regulating cryptocurrencies is so challenging, how the current approach of regulation by enforcement is failing both the crypto industry and consumers, and what a better framework might look like.

“It seems, as always, the regulation is lagging the tech and we’re stuck in this spot in the middle,” says Gellis, who believes that a fundamental lack of understanding around the technology lies at the heart of why regulating cryptocurrencies has been such a challenge for lawmakers. Their conversation touches on:

• The history and current state of crypto regulation in the U.S.
• Why regulating new technologies with old regulations is inherently challenging.
• What Gellis believes is needed for an effective regulatory framework.
• International models for regulating cryptocurrency.
• Potential benefits for governments that develop crypto-friendly policies.
• What’s next for crypto regulation in the U.S., what the future might hold, and much more.

For a comprehensive history of crypto regulation in the U.S., make sure to check out Gellis’ recent article for Ascend Magazine.