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Wall Street, venture capitalists and crypto companies descend on Capitol Hill to debate regulation

The crowdfunding process known as an initial coin offering, or ICO, caught the attention of regulators after bitcoin surged to almost $20,000 last year. Other, smaller cryptocurrencies also attracted floods of retail investors, bringing a total of $12 billion in funding this year alone, according to the latest estimates from data firm Autonomous Next.

U.S. financial watchdogs have been balancing consumer protection and innovation in the multibillion-dollar market. Still, crypto industry leaders have complained that laws need to be updated to accommodate the complex new digital asset class. Davidson's bill would be the first of its kind in Congress.

While Congress has yet to address the fundraising craze, the Securities and Exchange Commission has cracked down this year. Chairman Jay Clayton made it clear that he will not look to update securities laws to cater to crypto. Other top SEC officials have said ether and bitcoin are not securities, but Clayton and othershave saidthat other initial coin offerings should be treated as securities and fall under SEC jurisdiction.

For now, the Securities and Exchange Commission follows the "Howey Test" to determine whether or not an asset is a security. The ruling comes from a 1946 U.S. Supreme Court case that classifies a security as an investment of money in a common enterprise, in which the investor expects profits primarily from others' efforts.

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