Updated on January 10, 2023 2:14 PM
Leaders from the government and the cryptocurrency and blockchain communities come together at the annual Consensus conference in Austin, Texas, for the Crypto Policy Forum to discuss, debate, and decide where the state's business should begin and finish in the Web3 economy.
The Forum examines the development of digital currencies issued by central banks, the disagreements surrounding stablecoin regulation, the expanding application of anti-money laundering and counterterrorism laws to cryptocurrency services, and the difficulties in adapting 20th-century securities laws to 21st-century decentralised protocols.
The goal of the speakers and participants is to reach an international consensus on how to best implement a regulatory strategy that safeguards consumers and increases trust in the digital asset sector without unduly stifling innovation or undermining the goal of universally equitable financial access.
Analysts and investors are certain that the cryptocurrency markets will rebound in 2023 following a protracted bear market in 2020. This optimistic perspective has been strengthened by the fact that the industry has persevered during the crisis and demonstrated indications of recovery even under trying circumstances.
Regulators have been suing corrupt individuals in cryptocurrency for a long time. The U.S. Securities and Exchange Commission sued Kim Kardashian and several other prominent celebrities in 2022 for endorsing ethereumMax during the bull market in 2021.
BitPay and the Treasury Department reached a settlement regarding BitPay's platform being used by citizens of sanctioned nations including North Korea and Iran. In March 2022, the DOH established a taskforce to implement sanctions on Russia.
The U.S. government will probably continue its legal proceedings in 2023, according to a note from the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and "we will see additional crypto-related sanctions guidance, enforcement actions and designations in near term."
This is partly due to President Joe Biden's executive order on cryptocurrency from March 2022, which required federal agencies to report on the industry.
There will undoubtedly be no lack of lawsuits in the upcoming year. The Treasury Department expanded its sanctions on Tornado Cash, a decentralised Ethereum crypto-mixing service, in August 2022.
The SEC will also keep pursuing its lawsuit against Ripple Labs, the company that created XRP, over its alleged use of XRP in unregistered securities transactions. The cases of Three Arrows Capital, FTX, Voyager, and Celsius (plus the companies they claim as victims of their collapses) will continue to be resolved in bankruptcy courts, undoubtedly creating legal precedents for the sector.
The Markets in Crypto-Assets (MiCA) Regulation will continue to be pushed through by the European Union, which has surged ahead of the pack, in 2019. The law was "one of the first attempts internationally at full regulation of cryptocurrency markets," according to the law firm Akin Gump.
The measure covers a wide range of topics, including consumer protection, corporate transparency, and money laundering. As well as requiring cryptocurrency miners to reveal their energy usage, it would compel stablecoin issuers to maintain sufficient reserves to prevent its collapse.
Additionally, any exchanges operating in the area will need to be under the supervision of a financial authority from an EU member state.
BNP Paribas predicts that it won't become law until the second half of 2024, or 18 months after the bill is published in the EU's Official Journal, even though it was intended to be approved in early 2023 and the full text published in October 2022.
In its study on stablecoins from earlier this year, the Biden administration suggested stablecoin regulation as well as the potential for a digital dollar. A crucial stablecoin bill may finally progress in 2023.
A proponent of the legislation that would grant the Federal Reserve the authority to licence stablecoin issuers, Rep. Patrick McHenry (R-N.C.), referred to it as a "pretty ugly baby" because of the opposing arguments, mostly about who should regulate stablecoin issuers.
If it's the Federal Reserve, stablecoin issuers might obtain credit from the government-run institution or FDIC protection. Major U.S. stablecoin issuers like Circle and Paxos may be impacted by its phrasing.
Every government entity is focused on avoiding another collapse similar to the one seen during the FTX. The Bank of England's deputy governor urged the UK to "continue to bring these activities and organisations inside regulation."
The introduction of new regulations, he claimed, will guarantee that stablecoins "meet criteria similar to those required of commercial bank money." Treasury Secretary Janet Yellen in the United States has urged for the separation of client cash and business assets.
By imposing stringent regulations on clients' assets, the Senate Agriculture Committee's Digital Commodities Consumer Protection Act (DCCPA) seeks to safeguard individuals against another Celsius or Voyager.
If it proceeds, the Commodity Futures Trading Commission (CFTC) will supervise its implementation and prosecute individuals who violate the law. However, there is opposition since some believe this would make decentralised finance (DeFi) protocols more difficult to use.
Jennifer Schulp and Jack Solowey from the Cato Institute stated that it imperils "DeFi's unique properties of composability and permissionlessness."
Perhaps, though, adding several additional laws is not the best course of action.
In a statement following the demise of FTX, Yellen called for "more effective monitoring of cryptocurrency markets," noting that "we have extremely robust investor and consumer protection legislation for the majority of our financial products and markets that are designed to address these risks."
Former SEC branch director Lisa Braganca predicts that the SEC and the CFTC, rather than Congress, will be the ones to enact any new regulations.
According to regulators' detractors, the SEC might have changed its regulations before FTX's collapse since not enough was done to stop it from stealing consumer cash. In a Financial News op-ed, research director for the Committee on Capital Markets Regulation John Gulliver and emeritus professor Hal Scott suggested that an SEC accounting regulation discouraged respectable major banks from owning crypto assets.
In their statement, they stated that "banks and linked broker-dealers might provide their services to U.S. investors in cryptoassets and to crypto exchanges, placing cryptoassets in the hands of the safest custodians in the world."
Is there any regulation on cryptocurrency?
A unified framework for regulating cryptocurrency would be helpful. This legal latitude allows cryptocurrency firms to innovate and expand fast, but it also means that hazardous business practises that expose customers to danger might go unchecked. In 2021, Kurt Woock began contributing to NerdWallet.
What country has no crypto laws?
Singapore is now one of the nations that do not tax cryptocurrency. The Singaporean government sees cryptocurrencies as intangible assets as well.
Why crypto is not regulated by the government?
Digital assets known as cryptocurrencies are unbacked by any sort of authority. Government-issued money, sometimes referred to as "fiat money," is supported by the credit of the issuing nation or government institution, such as the Federal Reserve or European Central Bank.
Why must crypto be regulated?
This regulatory framework aims to safeguard investors, maintain financial stability, and promote innovation while enhancing the appeal of the crypto asset market.
How is crypto taxed?
You may write off any losses you incur while selling cryptocurrencies when filing your taxes. An independent purchase of cryptocurrency is not taxed. Even if the value rises, you may purchase and retain cryptocurrencies without paying taxes. A taxable event, such as the sale of the cryptocurrency, must occur first.
What is the biggest problem with cryptocurrency?
The value of cryptocurrencies is prone to sharp swings. Any period might see a decrease in value or a total loss. A total loss might also result from the loss of data access and passwords.