Since the lavish crypto bull run of 2017, regulators have stepped up activity in the industry. U.S. governing bodies such as the Securities and Exchange Commission, the Department of Justice, and the Commodity Futures Trading Commission have all pursued different types of law enforcement.
From December 2020 there will be more regulation, including a proposal from the Financial Crimes Enforcement Network aimed at increased crypto wallet overwatch. What do crypto industry players think of regulation right now?
Dean Steinbeck, co-founder of Horizen Labs, told Cointelegraph that, coupled with increasing institutional involvement, “messages from entities such as the SEC, OCC, IRS and FinCEN have indeed become more regular.” He added, “In recent months, we have seen an increase in the institutional adoption of Bitcoin / cryptocurrency, slowly but surely closing the educational gap between traditional and decentralized funding.”
Regulatory waters remain murky
Over the course of 2020, a number of major mainstream entities and individuals, including MicroStrategy, MassMutual, Square and Paul Tudor Jones, revealed their major purchases of Bitcoin. In 2019 and 2020, US regulators stepped up their activities in space, both in terms of enforcement and clarity.
“However, these notices and regulations are often complicated and unclear, which in turn makes them meaningless and misplaced in the eyes of the crypto community,” Steinbeck said, adding:
“What prevents the creation of transparent and fair regulations? Those who draft these regulations do not interact with crypto on a daily basis. If we can change the system in which these notices, rules and policies are drafted, the community can be more receptive to proposed regulations that are put in place. “
The past two years have resulted in a number of regulatory measures. The office of the controller of the currency gave national banks the green light for crypto custody. The Internal Revenue Service tried to clarify taxes, despite the agency’s best efforts additional confusion in the process. The IRS too added a question about ownership of digital assets to its tax return forms.
More recently, the CFTC and DoJ went after crypto derivatives exchanges BitMEX, the SEC has filed a lawsuit against Ripple, claiming its XRP asset as a security, and FinCEN suggested a rule supervise the flow of money to self-managed crypto wallets, as well as across platforms.
“We have come a long way as an industry, but in the same vein, we are only just getting started,” Konstantin Richter, Founder and CEO of Blockdaemon, told Cointelegraph when asked about his views on the current crypto regulatory scene, adding : “For the past year, crypto-regulators seemed to be moving faster and asking better questions – not necessarily simpler questions.”
Richter noted a current opportunity to guide governing bodies in learning more about the industry. He added:
“I think we are collectively able to put our best foot forward to encourage and inform regulators about the best ways they can be partners in innovation with the crypto industry in general and also more of the safeguards and standards necessary for continued institutional and widespread adoption. “
In terms of educated government rules, President Joe Biden’s choice of SEC chairman, Gary Gensler, will likely put a wealth of crypto knowledge in his position. Gensler taught a course on crypto and blockchain at Massachusetts Institute of Technology’s Sloan School of Management. Recent Cointelegraph reporting reveals Gensler’s vast knowledge of the industry.
Regulation of digital assets is not a strange concept
“Cryptoregulation has always been a hot topic, with news or even just rumors causing major price swings in the past,” Philip Salter, head of mining operations at Genesis Mining, told Cointelegraph.
Regulations have increased in line with the growth of cryptocurrency as an asset class. Part of the exit from a regulatory gray area may be government agencies handling comments from industry. Industry participants, for example inundated FinCEN with comments recently on the proposed crypto-wallet regulation from the governing body.
“We’ve seen a much more open and knowledgeable discussion of crypto regulation lately,” Salter said. “The big new topic seems to be whether KYC is required for personal wallets and coin holdings,” he explains, adding:
“This would have big implications and possibly cause some panic if it happened in the US. I think overall it is best not to worry too much about the rumors and regulations in the near term, but instead take a step back from that and recognize that it will take years to reach a definitive conclusion on crypto regulation. We are talking about a financial revolution, there is sure to be fighting. ”
Erik Finman, one early crypto buyer who became a millionaire through his Bitcoin investments sees regulation as a long-standing important point. “Regulation has always been the biggest challenge for cryptocurrency, and I think there has been a pause for a while with some of the political turbulence focused on other things,” Finman told Cointelegraph, adding:
Under the new administration, cryptocurrency advocates will have to do their best to work with the government to create win-win scenarios.
As the US continues to bolster the role of the government following a presidential switch on January 20, 2021, the atmosphere around crypto regulation remains to be seen. Gensler as the chairman of the SEC will bring a wealth of crypto knowledge to the committee, which could pave the way for well-trained regulation.
Janet Yellen, the President’s choice of Chancellor of the Exchequer, is concerned about the role of crypto in criminal transactions, according to her recent comments. Meanwhile, the industry awaits new developments for FinCEN’s portfolio regulation proposal, which the agency recently addressed extended the commenting period.