BitOoda Regulatory Analysis, 9/21/20: Progress with state-level crypto regulation — will SEC follow suit?
It was an action-packed week on the global regulatory front! We found it tough to choose which of this week’s topics to focus on for this writeup, so here’s a roundup of the most impactful developments:
· U.S. state banking regulators announced that they will form a coordinated cross-state framework for MSBs in the fintech/digital asset space.
· SEC Commissioner Hester Peirce dissented on the Commission’s enforcement action against Unikrn, and stated that the action will stifle innovation.
· Europe moved to align EU digital asset regulations and tighten its scrutiny of private (non-CBDC) stablecoins.
· A divergent pair of announcements were released in two developing markets, as India is again considering banning crypto trading while Nigeria’s SEC announced it will take the lead in regulating the country’s digital asset market.
Connecting these dots, these diverse developments represent positive steps toward the advancement of a more integrated and crypto-friendly regulatory landscape here in the U.S. In our view, the two most significant factors impeding the development of a coherent cross-jurisdictional regulatory framework are (1) the lack of a legislative foundation and (2) the SEC’s conservative “do no harm” or “regulation by enforcement” approach.
With Peirce’s safe-harbor proposal and her active commentary about the SEC’s failure to play an active role in coordinating and advancing a regulatory approach in the U.S. that better supports digital asset innovation, we are increasingly hopeful that the Commission will step up to lead the further maturation of the market, as its Nigerian counterpart has now done.
Until then, we view the introduction of a new state-level regulatory regime for MSBs — specifically payment and crypto firms who need to work across multiple states — as a significant development that signals regulators’ awareness of the challenges caused by the existing system of inconsistent and burdensome requirements. We assess the Conference of State Bank Supervisors (CSBS) recognizes the fact that digital assets will be integrated into the future of mainstream economic activity and is taking action to posture state-level MSB rules to better reflect the nature of that economic digitization.
This is also a noteworthy step toward reconciling the differences between national and state-level rules that have long been a challenge to digital asset firms seeking to operate compliantly. Combined with OCC’s interpretive letter ruling that banks can provide digital asset services — including crypto custody — the CSBS initiative is a solid gain for the evolving U.S. regulatory and market infrastructure.
Contact us to discuss BitOoda’s structured products and strategies designed to optimize institutional clients’ ability to engage in the digital asset space in a fully-compliant manner.