Pop quiz: what’s been different in the past two weeks on the U.S. crypto regulatory front?
- The U.S. President jumped into the fray.
- The Treasury Secretary delivered multiple press conferences regarding the direction of the country’s regulatory approach for crypto.
- NY’s DFS put more structure and definition to the team behind its BitLicense.
- Multiple congressional committees brought the full strength of their skepticism about Libra to a series of public hearings without doing permanent damage to bitcoin or crypto as a whole.
- The SEC approved the first Ethereum token sale via a no-action letter.
- All of the above.
Of course, the correct answer is ‘all of the above,’ even though any of these developments would individually qualify as significant. So, what does it all mean? How much weight should we really put behind Secretary Mnuchin’s comments forecasting a “unified approach” for U.S. crypto regulation and stating that federal agencies would soon start issuing additional rules for the space? Should we be on the lookout for more guidance along the lines of the recent joint statement on BD custody? Put more broadly, is a regulatory storm coming, or should we continue to expect more of the slow but steady progress that we have seen to date?
Our best read is that we should indeed expect an accelerated pace of regulatory activity by U.S. federal agencies over the next six months. We note with optimism the significant substantive understanding demonstrated by the SEC in recent months — as evidenced by the increasing pace of approvals for new types of products, such as an ETH-based token issuance — which may signal the end of its educational explorations and position it to more directly address the key issues facing U.S. crypto markets. Any level of increased coordination among federal regulators resulting from Mnuchin’s engagement — despite the critical tenor of his remarks — would be better than the uncoordinated web of jurisdictional and policy ambiguity that exists today. Similarly, the new DFS fintech division brings a clearer structure to a process that to date has been difficult for the industry to navigate. Lastly, Congress’ ability to distinguish Libra from bitcoin and keep its focus on Facebook’s privacy practices and overall financial stability — while conveying some positivity about the importance of financial innovation — leaves open the possibility that someday it may take action to provide a modern legislative foundation for crypto governance; the upcoming hearing by the Senate Committee on Banking, Housing, and Urban Affairs on “Examining Regulatory Frameworks for Digital Currencies and Blockchain” could provide further signals of Congress’ near-term direction.
The good news for our clients and partners is that BitOoda’s focus on regulatory compliance and our work to establish industry standards for fair and orderly markets positions us to leverage any new regulatory guidance. We welcome the coming storm and the opportunities it will provide for our ability to continue developing and executing more advanced and fully compliant solutions for our clients.