BitOoda Regulatory Analysis, 1/6/21: 2021 Poised for More Regulatory Fireworks

What an end to the year on the regulatory front! A frantic pace of activity on multiple fronts created an exciting end of 2020 for those of us who closely follow digital asset regulation. While we believe much of the action indicates the continuation of the trend we have previously written about — namely, the acceleration of regulatory activism by U.S. agencies — we also assess some of these policy statements, issuances and reports also reflect the upcoming administration transition and efforts by the incumbents to complete ongoing efforts.

Here is a roundup of the major regulatory highlights from the past few weeks:

· FinCEN proposed a new rule imposing self-hosted or non-custodial wallets, to KYC and reporting requirements for transactions above $3,000 — a move that was foreseen and that has been swiftly and widely condemned by industry participants, with over 6,500 comments submitted to date. For great commentary on the rule, we recommend Jake Chervinsky’s summary post.

· The President’s Working Group on Financial Markets released a report stating that stablecoins must meet the same regulatory and supervisory standards as other financial instruments.

· Staying with stablecoins, the OCC this week published a letter stating that banks can use stablecoins to conduct payment activities and other functions.

· The SEC issued a statement and request for comment enabling digital asset custodians to become regulated broker-dealers, which would let them offer securities (including security tokens) for trading.

· The CFTC issued a Digital Assets Primer as an educational tool to provide an overview of digital assets and CFTC’s role in the space.

· The Federal Reserve released a paper on “tokens and accounts in the context of digital currencies,” which explores the use of the terms “token” and “tokenization” in the context of central bank digital currencies (CBDCs) and payments.

· And last but certainly not least, the SEC on December 22nd — the day before Jay Clayton’s departure — announced a lawsuit against Ripple Labs for conducting an unregistered digital asset securities offering. The impact of the action is already being seen throughout the crypto ecosystem, with many exchanges delisting XRP and legal analysts delving into the subtleties of the pending arguments for both sides.

It will come as no surprise to our readers that we at BitOoda welcome the increased regulatory clarity that continues to shape a market environment that is suitable for institutional participants and increasingly intolerant of those seeking to shirk regulatory guidelines. While we joined our fellow ADAM members in urging policymakers to proceed smartly and thoughtfully with rules that could have a significant impact on the industry as a whole, we continue to applaud efforts intended to modernize the country’s regulatory framework and integrate digital assets into mainstream financial systems.

We look forward to another exciting year on the regulatory front in 2021, and encourage clients to reach out to discuss our compliant products and services as the digital asset space continues to evolve in an always-dynamic regulatory environment.