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When Federal Reserve Chairman Jerome Powell said he had no plans to ban cryptocurrency during testimony in Congress just days after China stepped up its crackdown by banning all related transactions, many players in the digital asset space were satisfied but not surprised.
“It’s hard for me to believe that US regulators would decide this was the best solution given the role cryptocurrencies play in the lives of so many citizens,” Bobby Zagotta, US CEO of the Bitstamp cryptocurrency exchange. “I think doing that would be incredibly disruptive and really put the United States and the economy in a difficult position.”
A ban would also drive technological and financial innovation outside the United States and other countries, according to Charlie Silver, CEO of crypto-focused online advertising company Permission.io.
Instead, what crypto players say they want to see are two things: stakeholder engagement and regulatory clarity.
“The United States is the financial center of the world – the flow of capital is here,” Silver told Insider. “I always thought the United States was going to regulate crypto, but with a slight twist.”
Regulators, including the Securities and Exchange Commission, have questioned how to oversee the space. SEC chief Gary Gensler hasn’t shied away from criticizing digital assets, saying this month platforms have grown too big, stablecoins are equivalent to poker chips, and crypto is not a viable long-term form of private money.
But none of these sentiments are a political guideline, and their comments only give hints as to the direction the agency may take to regulate crypto, leaving the market to guess what it may need to do to comply with future rules. .
Regarding engagement, Zagotta said he hoped US regulators would have what he described as a “constructive, partnership-based approach” that stakeholders come in and discuss with regulators on policies. put in place rather than “regulation by application”. one in which regulations from decades ago are adapted to apply to current trends.
“We believe that for true widespread adoption to happen, there have to be rules,” Zagotta told Insider. “There is a kind of anarchist inclined to some of the crypto players where they think no rule is applicable in any jurisdiction. This posture is going to slow adoption.”
Some have already drawn the wrath of the SEC. Coinbase has engaged in a public row with the regulator over its crypto lending program, Lend, which allegedly allowed customers to earn 4% interest on their crypto holdings. The SEC said it would continue the crypto exchange if it launched the product. A few days later, Coinbase put Lend aside.
When it comes to clarity, many are just saying they want some direction on what will be addressed first. Possible areas of interest for regulators include accredited fundraising, insider trading and client verification or know your customer (KYC) processes, Silver added.
If the authorities are serious about getting the industry under control, they could focus their initial efforts on more onerous tax arrangements, said Dean Steinbeck, general counsel and chief operating officer of blockchain company Horizen Labs. This would involve closing a beneficial tax loophole, treating crypto more like stocks. Congress is thinking about it now.
Still, there is some hesitation as to what regulators will eventually come up with.
“I don’t expect the United States to implement thoughtful policy,” Steinbeck told Insider. “Instead, I would expect a random set of unintelligible laws to be enacted that have no clear direction and are impossible to enforce.”
Earlier in the week, Gensler warned that cryptocurrency investors are “likely to be hurt” if the digital asset space does not have the same kind of protection against fraud and manipulation as bank deposits. and insurance.
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