{"id":7566,"date":"2022-10-02T12:57:08","date_gmt":"2022-10-02T12:57:08","guid":{"rendered":"https:\/\/cryptoheretostay.com\/?p=7566"},"modified":"2022-10-02T12:57:09","modified_gmt":"2022-10-02T12:57:09","slug":"u-s-regulators-are-coming-for-crypto-how-will-the-future-look","status":"publish","type":"post","link":"https:\/\/cryptoheretostay.com\/?p=7566","title":{"rendered":"U.S. Regulators Are Coming for Crypto. How Will the Future Look?"},"content":{"rendered":"<p> <script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"crypto\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<\/p>\n<h3>Key Takeaways<\/h3>\n<p>Several recently proposed bills and ongoing enforcement cases could define crypto industry&#8217;s future in the U.S.<br \/>\nIf the SEC and CFTC win their ongoing crypto lawsuits, they could set a terrible precedent for decentralized finance and the broader industry.<br \/>\nHowever, if the regulatory agencies lose, crypto could enjoy a renaissance.<\/p>\n<p>Share this article<\/p>\n<p>The U.S. government\u2019s approach to crypto regulation will determine whether the industry evolves to flourish or flounders into obscurity.\u00a0<\/p>\n<h2><strong>The U.S. Crypto Regulatory Landscape<\/strong><\/h2>\n<p>Crypto regulation is coming to the U.S.\u2014and it\u2019s likely to have a major impact on the future of the industry.<\/p>\n<p>The first key distinction to consider when analyzing the current state of play of crypto\u2019s regulatory landscape in the U.S. is the difference between the government\u2019s legislative and enforcement approaches. This is akin to comparing what the government says to what it does in practice, which is important because the difference between the two approaches provides valuable insight into the government\u2019s true intentions concerning the industry and asset class.<\/p>\n<p>On the legislative front, there has been a significant increase in crypto-related bill proposals over the last year, including Senators Cynthia Lummis and Kirsten Gillibrand\u2019s Responsible Financial Innovation Act, Representative Josh Gottheimer\u2019s Stablecoin Innovation and Protection Act of 2022, Senator Pat Toomey\u2019s Stablecoin TRUST Act of 2022, and Senators Debbie Stabenow and John Boozman\u2019s Digital Commodities Consumer Protection Act of 2022. If these bills come to pass as proposed, the crypto regulatory and industry landscape will see significant changes, most of which industry stakeholders have valued as positive.<\/p>\n<p>Perhaps most notably, the Commodity Futures Trading Commission would take precedence away from the Securities and Exchange Commission in becoming the primary regulator of the asset class by gaining authority over cryptocurrency spot and derivatives markets. Until recently, this was considered a highly welcomed change among industry stakeholders who have become fed up with the SEC\u2019s aggressive \u201cregulation by enforcement \u201d approach.\u00a0<\/p>\n<p>Another major change that would follow if these bills passed would be the introduction of significantly more stringent rules for issuing and managing stablecoins. This could lead to an implicit prohibition of unbacked, algorithmic, or \u201cendogenously collateralized\u201d stablecoins and 100% reserve requirements for stablecoin issuers. Stablecoin issuers will likely be required to own bank charters, which are very difficult to acquire, or register directly with the Federal Reserve. This would significantly reduce depeg risks within the cryptocurrency market. However, it could also centralize the on-chain economy if the space becomes too reliant on regulated stablecoin providers.\u00a0\u00a0<\/p>\n<p>However, perhaps the most important development on the legislative front is the White House\u2019s recent comprehensive framework for regulating the digital assets space. The framework was published on September 16 after President Biden signed an executive order on \u201cEnsuring Responsible Development of Digital Assets\u201d in March. It comprises the views and recommendations of the SEC, the Treasury Department, and multiple other government agencies on how to regulate crypto assets.\u00a0<\/p>\n<p>The framework provides the clearest overview to date of how the Biden Administration plans to deal with crypto, including plans to ramp up enforcement actions against illegal practices, pushing users away from crypto and toward government-issued and controlled centralized payment solutions like FedNow and CBDCs, amending the Bank Secrecy Act to apply explicitly to digital assets, and leveraging the country\u2019s standing in international organizations to promote greater cross-border cooperation on crypto regulation and enforcement.<\/p>\n<p>If the administration begins delivering on its plans, the U.S. crypto industry will start looking increasingly more like fintech than the grassroots movement seeking to create an alternative financial system it set out to be.\u00a0By enforcing excessively stringent regulatory requirements on the industry, its stakeholders could start leaving the U.S. for more crypto-friendly jurisdictions, leading to an exodus of Web3 talent and eventually America\u2019s subservience on the global crypto scene.\u00a0<\/p>\n<h2><strong>Regulation Through Enforcement<\/strong><\/h2>\n<p>On the enforcement front, there are several critical ongoing cases that\u2014depending on their outcome\u2014could reshape the cryptocurrency landscape in the country. The most widely documented of these cases is the SEC v.\u00a0Ripple, in which the securities agency is suing the blockchain company for allegedly conducting an illegal security offering by publicly selling XRP tokens. Judging by the case\u2019s latest developments, the matter will likely be settled out of court, which would be a major win for both Ripple and the U.S. crypto industry. For the securities agency, losing the case or settling out of court would make it much harder to pursue other crypto companies on the same charges, giving crypto issuers and exchanges much-needed breathing room.<\/p>\n<p>The second critical case is SEC v. Wahi, where the securities agency is suing a former Coinbase employee and two co-conspirators on insider trading charges. In a flagrant example of \u201cregulation by enforcement,\u201d the SEC argues that \u201cat least\u201d nine of the cryptocurrencies listed on the exchange were securities. If accepted by the court, this claim could have broad implications in the industry by making it easier for the agency to pursue crypto exchanges for illegally offering unregistered securities.<\/p>\n<p>In another ongoing case highlighting the SEC\u2019s \u201cregulation by enforcement\u201d approach, the agency is trying to establish its hold over the industry by making broad claims that could have severe implications for the asset class. Namely, in the SEC v. Ian Balina case, the agency has argued that Ethereum transactions should be considered as \u201ctaking place\u201d within the U.S. because more Ethereum nodes are located in the U.S. than in any other country. For that reason, the SEC says, Ethereum should fall under its jurisdiction.\u00a0If the court accepts this argument, the SEC could then try to establish jurisdiction over all Ethereum transactions involving tokens that it deems securities, regardless of the transaction counterparties\u2019 location.<\/p>\n<p>In another disappointing development for the crypto community, the CFTC\u2014 following in the SEC\u2019s footsteps\u2014is suing a decentralized autonomous organization and its token holders on charges of operating an illegal derivatives trading venue. The CFTC winning this landmark case would set a terrible precedent for DeFi protocols and token holders by ensuring they can be held liable for various crimes as \u201cunincorporated associations.\u201d This would effectively ravage DeFi, making it impossible for protocols and DAOs to function without risking prosecution.<\/p>\n<p>Finally, the Treasury\u2019s move to sanction the decentralized privacy protocol Tornado Cash stands out as one of the top enforcement actions that have already had an outsized effect on the industry. The move represents the first time a government agency has sanctioned a smart contract\u2014immutable code living on the blockchain\u2014and several key blockchain infrastructure providers, like Alchemy and Infura, have already complied with the sanctions.<\/p>\n<p>Many crypto legal experts, including the U.S.-based crypto advocacy organization Coin Center, deem the move unconstitutional and a gross jurisdictional overreach and will likely challenge it in court. However, if the Treasury wins any challenging lawsuit, the entire crypto economy could suffer, casting doubt on its ability to uphold its core tenets like decentralization, credible neutrality, and censorship resistance.\u00a0<\/p>\n<h2><strong>Looking Ahead<\/strong><\/h2>\n<p>Depending on whether the recently proposed cryptocurrency regulations come into law, and how the enforcement cases go, the U.S. crypto landscape could look completely different a couple of years from now. The optimistic view is that both the SEC and the CFTC lose all of the lawsuits that could set the industry back while lawmakers pass the more favorable proposed laws that offer clarity when it comes to regulation.\u00a0If that becomes the case\u2014and the chances are rather significant\u2014the U.S. could become the world\u2019s leading crypto-friendly jurisdiction, propping up the entire global industry with it.<\/p>\n<p>On the other hand, the worst-case scenario is that legislators take way too long to pass favorable crypto regulations while the SEC and CFTC slowly regulate the space through enforcement. This would severely hinder the U.S. crypto industry\u2019s remarkable growth and any technological innovation coming out of it. Given the U.S.\u2019s outsized political and economic international influence, such a scenario would also bode negatively for the global crypto industry. One potential outcome of a tough regulatory environment is DeFi\u2019s fragmentation into \u201cRegFi,\u201d composed exclusively of regulatory-compliant protocols, and DarkFi, composed of genuinely decentralized, non-compliant, censorship-resistant protocols.<\/p>\n<p><i>Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies.<\/i><\/p>\n<p>Share this article<\/p>\n<p>The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.<\/p>\n<p>You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.<\/p>\n<p>See full terms and conditions.<\/p>\n<p><script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"bitcoin\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<br \/><a href=\"https:\/\/cryptobriefing.com\/us-regulators-are-coming-for-crypto-how-will-the-future-look\/?utm_source=category_feed&#038;utm_medium=rss\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways Several recently proposed bills and ongoing enforcement cases could define crypto industry&#8217;s future in the U.S. If the SEC and CFTC win their ongoing crypto lawsuits, they could set a terrible precedent for decentralized finance and the broader industry. However, if the regulatory agencies lose, crypto could enjoy a renaissance. 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