US Crypto Regulation 2022: Everything We Know So Far
After prolonged anticipation, US president Joe Biden had signed an executive order concerning cryptocurrency. The multi-part executive order is the first initiative from the United States federal government in tandem to regulate cryptocurrencies.
What's in the order?
The president's order seeks a significant update on the US financial regulation to involve cryptocurrency in the mainstream economy. The order has also asked various federal agencies to look into multiple popular cryptocurrencies, including Bitсoin and Ethereum, to propose some new rules as part of the regulation.
- The US Department of Treasury would bring up legislation to protect its investors from the onslaught of crimes and scams and the high volatility of cryptocurrencies.
- Government-backed research organization Financial Stability Oversight Council will assess whether the cryptocurrency can potentially threaten the US economy and figure out regulatory loopholes.
- The federal government could introduce a national strategy to protect its investors and consumers from scams and online criminal activities. However, the responsibility has been shouldered by the Secretary of Treasury, the attorney general, and the Department of Homeland Security.
- The Department of Commerce has been asked to introduce a framework to maintain the competitiveness and leadership of the United States in the global economy.
- The president has also asked to investigate the high energy consumption of blockchains and their impact on the climate.
- The order instructed the government to encourage technological advancement that could boost crypto among other digital assets by prioritizing security and privacy.
The US president has also asked the Federal Reserve to rush the research and development process to introduce a US Central Bank Digital Currency (CBDC). The research seeks the necessary technological infrastructure and capacity to raise its CBDC across several countries and will become a virtual substitute for the US dollar.
Like USDT (Tether), the CBDC would be introduced as a stable coin with less volatility than other cryptocurrencies such as Bitcoin.
The US government may soon introduce its digital wallet and ledger alongside this coin.
The Progress of the Legislation
Weeks after Biden's order, two US senators, Cynthia Lummis and Kirsten Gillibrand, have confirmed working on a regulatory framework for cryptocurrency bipartisan.
Cynthia Lummis, a Republican Senator from Wyoming and pro-Bitсoin in Congress, is implementing her prowess with New York senator Kirsten Gillibrand to write a regulatory framework.
In a recent interview with Politico Live, the senators expressed they are reviewing different aspects of the crypto industry intensively to finalize the legislation, which could roll out in a few weeks. To ensure the effectiveness of the legislation, Lummis and Greenberg are taking the opinions of several stakeholders, regulators, and industry experts.
The Two-Part Legislation
The Senators stressed the bipartisan regulations would have two categories – Commodity Futures Trading Commission (CFTC) and Security and Exchange Commission (SEC). The CTFC will play a significant role in regulating cryptos, and SEC will also remain proactive in this space.
The committee will categorize over 18000 cryptocurrencies under two major categories- security and commodity. And the senators asserted to use of the vintage Howey Test to define which cryptocurrency falls under which category.
The bill would include Stablecoins and CBDCs and would also modify the definition of a crypto broker to simplify the tax regime. Senators asserted that the upcoming bill would address extended topics, including consumer protection, taxation, privacy, and banking issues.
The CAP Report
CTFC and SEC, among other agencies, could use a report from the Center for American Progress (CAP) to communicate their decisions concerning crypto governance.
The CAP report suggests the crypto companies might have to register themselves with SEC by disclosing their prospectus before marketing and selling the crypto. They would also require to file disclosure reports, including important information for the investors. Such efforts could help the regulators to minimize the rug-pull incidents.
The CAP report also suggests that the brokers should be forced to affiliate themselves with Financial Industry Regulatory Authority (FINRA). In addition, they should be restricted from participating in manipulative, deceptive, or other scamming acts.
CAP suggests that SEC could regulate wallet providers as clearing agencies, "which act as intermediaries in the buying and selling securities, helping ensure a settlement or reduce the number of settlement transactions by holding securities in custody for clients."
The comprehensive report has explained detailed regulations on exchanges, DeFi, stablecoins, etc.
Expert's and Investor's Opinions
The crypto market in the US has a mixed response to Biden's stance. While a section concerned more about crypto and ICO scams, frauds, and increasing criminal activities claims the US should employ strict regulation on the cryptocurrencies and exchanges, a section of perturbed investors feel a new law could put a harness on the technology resulting in a restructuring of the crypto market.
The Global Impact
However, Biden's over-enthusiasm about crypto regulation is because of his opinion about the importance of crypto in the US economy. Biden thinks the virtual currency has some real potential to retain US dominance across the globe. Rushing into unveiling the crypto regulation could be a step to create a maximum impact on imposing stricter sanctions against Russia.
About the author
Anirban Roy has been a technology journalist for over a decade and has an edge in cryptocurrency, blockchain, AI, and cybersecurity news and analysis.
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