The Oklahoma Bar Journal January 2023

meaningful counterparty risk into the payments system.” Banking trade associations have pushed back hard on a U.S.-issued CBDC. In its state ment before the House Financial Services Committee, the American Bankers Association stated that a CBDC was not necessary to “digi tize the dollar.” It went on to state, “There is a growing recognition that the deployment and use of CBDCs would be weighed down by very significant real-world trade-offs. The main policy obsta cle to developing, deploying, and maintaining a CBDC in the real economy is the lack of compelling use cases where CBDC delivers benefits above those available from other existing options.” It is the early days for virtual currencies when it comes to laws and regulations. By and large, the Securities and Exchange Commission (SEC) has taken the lead in regulating virtual curren cies. In 2019, the SEC published its “Framework for ‘Investment Contract’ Analysis of Digital Assets,” which applies the Howey test 31 to determine if an investment

contract (which is a type of security) exists. Under the Howey test, an investment contract exists if there is: 1) an investment of money, 2) a com mon enterprise and 3) a reasonable expectation of profits to be derived from the efforts of others. In 2021, the SEC’s Crypto Assets and Cyber Unit (formerly known as the Cyber Unit) in the Division of Enforcement grew to 50 dedicated positions. In September 2022, the SEC announced plans to add an Office of Crypto Assets and an Office of Industrial Applications and Services to the Division of Corporation Finance’s Disclosure Review Program. The SEC has filed many enforcement lawsuits, particularly targeting alleged Ponzi schemes. The Commodity Futures Trading Commission (CFTC) has deter mined that even if virtual curren cies can be securities, they can also meet the definition of commodities. While the CFTC does not have authority over “spot transactions” (transactions for instant delivery on a specific date), it does have oversight over futures, options and derivatives contracts. The CFTC’s jurisdiction is also triggered if there is fraud or manipulation in interstate commerce. The CFTC has acted against unregistered cryp tocurrency futures exchanges and has, like the SEC, pursued virtual currency Ponzi schemes. Other regulators have assumed authority regarding virtual currencies as well. The Office of Foreign Assets Control (OFAC) has determined that U.S. “sanc tions compliance obligations apply equally to transactions involv ing virtual currencies and those involving traditional fiat curren cies.” The Office of the Comptroller of the Currency (OCC), which regulates nationally chartered banks, has issued several inter pretive letters determining that banks under its supervision were

already transacts mostly in digital dollars – by sending and receiv ing electronic balances in our commercial bank accounts … the dollar is already highly digitized. The Federal Reserve provides a digital dollar to commercial banks, and commercial banks provide digital dollars and other financial services to consumers and busi nesses. This arrangement serves the nation and the economy well: The Federal Reserve functions in the public interest by promoting the health of the U.S. economy and the stability of the broader financial system, while commer cial banks compete to attract and effectively serve customers.” 30 Other board members have been more open to the potential for CBDC. In her testimony to Congress, current Vice Chair Lael Brainard stated, “It is prudent to consider how to preserve ready public access to safe central bank money, perhaps through the digital analogue of the Federal Reserve’s issuance of physical currency … New forms of digital money such as stablecoins that do not share these same protections could reintroduce

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THE OKLAHOMA BAR JOURNAL