As the United States embarks on a journey of introducing new legislation regarding cryptocurrencies, questions are arising from both within the crypto industry and outside of it. The skepticism is palpable and it’s clear that many people are not convinced that the proposed legislation is the best way forward. This article examines why the legislation is meeting skepticism and raises questions about the potential outcomes for the US cryptocurrency industry.
1. Overview of Crypto Regulations in the U.S
Cryptocurrency laws in the United States are complex and have been changing faster than regulators can keep up. Countries around the world are grappling with how to best regulate the technology, but the United States is leading the way. Here is an overview of the current legal framework governing cryptocurrencies in the U.S.
- Securities Laws: In the U.S., cryptocurrencies are considered securities and are therefore subject to securities laws and regulations. To legally sell or buy, a company must be registered as a broker-dealer with the Securities and Exchange Commission (SEC).
- IRS Taxation: The IRS views cryptocurrencies as property, not currency. This means that they are taxable as any other property, and are subject to capital gains tax.
- Money Transmitter Laws: Any entity dealing in cryptocurrencies must follow licensure requirements set by individual states. Whether a company is considered a money transmitter depends on the activities and services provided.
- Commodities Laws: The Commodity Futures Trading Commission (CFTC) has determined that cryptocurrencies are commodities, and as such, any crypto trades must follow CFTC regulations.
- State Regulations: Several states, including New York, Washington, and California, have their own regulations governing cryptocurrency activities such as digital wallets, trading, and mining.
- Cybersecurity Laws: Cybersecurity laws are designed to protect users and preserve the integrity of cryptocurrency transactions. They cover topics including identity theft, data protection, encryption, and other security measures.
Regulators in the U.S. are still in the process of developing a comprehensive regulatory framework for cryptocurrencies. As the space continues to evolve, it is important to stay up to date on the latest developments to ensure compliance with applicable laws.
2. Technical Challenges Create Hurdles for Government Regulation
As governments around the world look for ways to fight the current pandemic, one of the biggest challenges hinder their efforts: the technical hurdle of creating and enforcing effective regulations.
This new challenge is the latest hurdle municipalities and nations are facing in the fight against the virus. Inexorably, their ability to combat and defeat the virus depends explicitly on the implementation of effective, dependable regulations and compliance.
The challenge lies in translating ideas into enforceable laws through ever-evolving technology. At present, no single technology exists to monitor, track and log data effectively and accurately. Moreover, the application of technology in multinational regulations or laws is a complex scenario.
For starters, international laws require approvals from the different partners and are then tailored to fit the local context. Once a law is developed, keeping it digitally up-to-date is a mammoth task. To maintain up-to-date information consistently, amendments have to be made by humans and programmed into technology manually.
- Data privacy concerns: Confidentiality of the data and its privacy is a strict requirement for its effective enforcement. It also imposes a stringent data security protocol which is difficult to implement.
- Data manipulation: Data manipulation is a major issue of concern. It’s important to develop an algorithm through which fraudulent transactions and data can be identified – to prevent it from slipping through the cracks.
- Lacking infrastructure: Lack of infrastructure is another challenge governments face in the implementation of regulations. This is especially true in remote or rural areas where access to technology is limited.
Hence, the development of effective digital systems to monitor and enforce regulations poses an immense challenge. Government authorities need to address these technical challenges with smart solutions so they can effectively respond to changing situations. Despite the difficulty in implementing laws digitally, governments must remain steadfast in their efforts and continue to deploy technologies in the best interests of their citizens.
3. Concerning Views from Crypto Community
Although the market of cryptocurrency is still in its infancy, certain indications show that the crypto community’s view is slowly progressing and taking a more positive outlook. Across forums and platforms, the view of crypto asset proponents has been that of anticipation and optimism.
The Emergence of a New Economy
The idea of a future economy that uses the technology underlying cryptocurrencies, such as the blockchain, has been discussed in depth. According to some crypto proponents, having a distributed ledger and digital currency would vastly simplify the task of transaction tracking, making it possible for users to access various services in real time.
- Eliminates need for intermediaries
- Reduces cost and improves speed of transactions
- Greater transparency and trustworthiness
Risks of Cryptocurrencies
Not everyone agrees with the rapid growth of crypto assets; some members of the cryptocurrency community have raised concerns about their potential risk. Those who worry about cryptocurrencies believe there to be unscrupulous individuals who are taking advantage of the lack of regulation to scam investors.
- Susceptible to market manipulation
- Fear of increased cybercrime
- Potential for scams
There are also some crypto proponents who are worried about governments potentially introducing rules to control or even outright ban the circulation of tokens and coins.
4. FinCEN’s Proposed Rule Changes Draw Criticism
The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, recently proposed new regulations affecting the anti-money laundering and countering the financing of terrorism practices of U.S. financial institutions. The proposal has been met with criticism that includes accusations of overreach and confusion among practitioners.
The proposed regulations would require financial institutions to report, by name, and collect beneficial ownership information on companies that are customers of their services. This requirement has been viewed as a governmental overreach, reversing the burden of proof that had been maintained by the government to demonstrate the illegitimacy of a transaction rather than requiring compliant businesses to prove its legitimacy.
In addition, practitioners have alleged that the proposed regulations are overly vague, with ambiguity for the industries affected. Professionals are unsure regarding the filing requirements, including who must file and when, and what must be reported.
- The American Bankers Association has fingered confusion among member institutions due to the proposed rules being heavy handed and filled with ambiguities.
- The National Association of Professional Background Screeners has voiced concern over the difficulty in deciphering the data that would be collected.
- The banking industry has taken issue with the liabilities associated with not reporting, both civil and criminal. The concern is that, as financial institutions are expected to accomplish this feat with little or no additional resources or support, mistakes could be costly.
Both privatized stakeholders and governmental watchdogs agree that further simplification and clarification of the proposed regulations is essential. Furthermore, some stakeholders have voiced concern that the penalties for non-compliance are overly punitive.
The implications of these regulations remain to be seen. It is uncertain if the proposed changes will be enacted in their current form, or if stakeholders will be able to successfully challenge the modifications.
5. A Look Into the Potential Political Responses
The 2020 presidential election has major implications when it comes to the issue of climate change and the environment. As the world grapples with the reality of rapidly increasing temperatures, rising sea levels, and global warming, the political response from various governments and world leaders will become increasingly important. Here are 5 potential political responses to the climate crisis:
- Green energy initiatives: Governments could invest in renewable energy sources such as solar and wind, as well as make buildings more energy efficient. Additionally, policies that would promote the usage of electric cars and other fuels could be spearheaded to combat climate change.
- Carbon pricing: Carbon taxes and cap-and-trade systems can be used to put a price on carbon dioxide emissions, thus deterring companies and individuals from polluting the environment.
- Climate Adaptation Funds: Governments could set up funds and provide grants to poorer or developing nations to help them prepare for and adapt to the changing weather patterns and other impacts of climate change.
- Protecting Natural Ecosystems: Leaders could work to protect natural ecosystems such as forests, coral reefs and mangroves, as these areas help mitigate the effects of climate change.
- Encouraging Sustainable Agriculture: Governments could incentivize sustainable farming practices by providing subsidies for organic food production, reducing fertilizers and pesticides, and preventing soil erosion.
- Creating International Collaboration Networks: Leaders could work together to create plans and networks to share technology and expertise in order to combat climate change.
Each of these potential solutions will require a great deal of commitment and collaboration between world governments, scientists and citizens. If a concerted effort is made, it is possible to make progress in mitigating the impacts of climate change and preserving our planet for generations to come.
It is clear that the world is at a pivotal moment in regards to the climate crisis. No single government or individual can take the necessary actions alone – it will require a collective effort to ensure that the future is secure and the world is saved from the devastating effects of climate change.
Now is the time for governments and leaders to take action. It is up to all of us to demand that meaningful change is made and that concrete steps are taken to combat climate change and protect the environment.
6. Experts Weigh In On the Future of Crypto Regulation in the U.S
1. Changes Could Include Regulatory Clarification
In the current climate of uncertainty, many experts anticipate that U.S. crypto regulations could provide more clarity for the industry. According to Marc Hochstein, managing editor at CoinDesk, “the big developments you’ll probably see with respect to the U.S. regulating cryptocurrency is really just ‘rules of the road’ that help clarify when coins need to be registered with the SEC, when companies need to abide by money transmission laws and such.”
2. Potential Regulations Could Represent an Opportunity For Crypto
Although laws can be intimidating, they could also be a boon for the industry. Dr. Garrick Hileman a research fellow at the Cambridge Centre for Alternative Finance, posits that “regulations have the potential to drive innovation, unleash new product offerings, reduce fraud and improve reputation.”
3. Lack of Communication Could Prove Challenging
Presently, many experts anticipate that regulatory clarity is some time away. Speaking on behalf of the Future of Crypto Regulation in the U.S., Tom Glocer, former CEO of Thomson Reuters, states: “Right now, I’m not sure that the regulators are actually even in dialogue with the industry in the U.S. — whereas other governments are.”
4. Legislation Could Take Years To Implement
Even if the regulators do start engaging with industry, there’s no guarantee that new legislation will be fast-tracked. Jennifer Kim, chief of staff of the cryptocurrency conglomerate Binance, comments: “I think given where we are, both from a technical standpoint, as well as from a communications standpoint, it’s going to take probably some time.”
5. The 2020 Presidential Election Could Prove Impactful
Given the long timeframe involved in producing new legislation, the result of the 2020 U.S. presidential elections could have a significant impact on the future of crypto regulation. As Ben Lawsky, founder of The Lawsky Group, states: “The 2020 presidency will largely dictate a lot of this forward-looking regulation — that’s a known factor.”
6. Several Agencies May Be Involved
However, change need not take quite so long. According to Brad Garlinghouse, CEO at Ripple, different authorities may move more quickly. “I think the interesting dynamic is that there’s not just one government controlling the dynamics here,” he says. “[It] could be the SEC, it could be FinCEN, it could be other government agencies.” As the U.S. moves closer towards crypto regulation, it appears that the majority of investors and companies in the space remain skeptical about the outcome. Whether it will prove beneficial or detrimental for the crypto industry still remains to be seen. In the meantime, it looks as though the debate will continue as to whether the U.S. will encourage or discourage the development and use of cryptocurrencies.