In our second weekly regulation-focused review, we would like to comment on the recently-renewed promise of legislative support from the U.S. Congress for progress on crypto regulatory clarity, and what it could mean for the industry.
On February 19, four U.S. representatives introduced two proposed bills: one would direct CFTC and SEC to address manipulation in virtual currency markets, and the other would direct regulatory agencies to submit a report addressing the potential benefits of virtual currency in the U.S. commodities market, propose legislative changes to promote U.S. competitiveness and encourage the growth of virtual currencies, and offer a new regulatory structure for virtual currency spot markets. These two bills join other federal blockchain-related bills reintroduced earlier this year.
Our view is: it’s about time! Federal regulators have pursued a wait-and-see approach designed to explore risks and opportunities, promote fintech innovation, and avoid a regulatory failure that would cause significant harm to investors. This was understandable given the newness of blockchain technology and digital markets, but the time for education, exploration, and observation should now give way to more proactive support for the evolution of the crypto space. Despite SEC’s recent speeches promising that regulatory clarity is on its way, higher-level action is needed to spur an effective move to address the overlapping, ambiguous, and uncoordinated collage of jurisdictions across multiple federal and state-level agencies. Our hope is that the increasing pressure on SEC and CFTC from Congress will jumpstart a new effort to put in place a more coordinated regulatory structure that clarifies and deconflicts the multiple sets of requirements that apply to digital assets.
These federal bills also could provide a needed national-level umbrella over the growing body of state-specific laws. For example, New Hampshire and California are both considering bill that would allow state agencies to accept cryptocurrencies as payment for taxes and fees; Ohio this year became the first state to accept Bitcoin for tax payments; Wyoming passed two crypto-related bills, including one on tokenization, and Colorado proposed a bill that would exempt cryptocurrencies from securities laws. While there is a long way to go in putting forth the type of regulatory clarity at the federal level that will address ambiguities, promote market growth, and clarify jurisdictional gaps and overlaps, this legislation — if passed — would be a big step in the right direction.
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