The cryptocurrency boom of 2017 brought the attention of regulators the world around. Suddenly, Bitcoin and other cryptocurrencies transitioned from a largely unregulated libertarian fantasy into a legal target.
Despite the seeming urgency of the situation, many regulators were unsure about how to approach the matter. Indeed, Braden Perry, a former enforcement attorney at a federal agency and Chief Compliance Officer of a financial firm, told Finance Magnates that the most notable thing about the changes in the United States’ cryptocurrency regulations is that, well, nothing has really changed–most likely due to this confusion.
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How has regulation changed in the US throughout 2018?
“The major takeaway is the regulatory treatment is (still) unclear for cryptocurrency,” he told Finance Magnates. “It seems as if every federal regulatory agency has chimed in on cryptocurrency, but none have taken the lead. The CFPB, SEC, and CFTC have all taken some action, but the legal space is still very confusing and this appears to be the SEC’s attempt to lead in the ICO state.”
Do we want regulation in crypto? pic.twitter.com/MKttbRjxv3
— John McAfee (@officialmcafee) May 30, 2018
Logan said that over time, this should “increase BitCoin use.”
“The others may reduce the use as unscrupulous users go in search of more secretive methods of exchanging assets. The market is so large that many of the changes will not be obvious until some time has passed,” she explained.
How Have Regulatory Changes in the US Affected Crypto Markets Globally?
“While it would be convenient to pin the decline on regulatory failures, which scared off the US capital market, I think that is only a small part of the story,” Minihan said. “The regulatory issues certainly led to a decline in token offerings, and a consequent decline in key parts of the market, including Ethereum. In a falling market, many projects needed to sell crypto holdings to continue operations, and that has likely hurt prices too.”
Further, the government’s inaction has likely stifled the adoption of cryptocurrency use. “The enforcement actions of the SEC, together with the general decline in the cryptocurrency market capitalization, has likely slowed the path towards widespread adoption. In addition, the US failure to move forward with things like a Bitcoin ETF, or adequate tax regulation, have likely dampened activity in the cryptocurrency markets, and thus, widespread adoption,” Minihan said.
What kind of regulatory changes would the crypto market need in order to truly flourish? Braden Perry told Finance Magnates that the government needs to “make sure the regulators are on the same page.”
“That’s obviously not occurred,” he added. “The CFTC, SEC, and FinCEN all this past week as attempted to snarl headlines from one another and only cooperative and cohesive federal regulations will allow a broader framework to occur.”
“You [also] need input from the stakeholders, meaning those in the industry and those with interest in investing in the industry,” Perry said.
Indeed, there are some regulators who have attempted to reach out to figures in the cryptocurrency industry. “In September, numerous leaders in the cryptocurrency industry met with Congress with a common message that regulation was welcome, and would actually create more certainty for the marketplace, thus reducing volatility, and increasing acceptance,” Minihan said.
On the industry side, at least one PAC (political action campaign) has been formed, and Gemini founded a self-regulatory organization earlier this year.
“Finally, the regulations need to be pliable enough to survive the everchanging technology, something which the government does not do well,” Perry said. What’s most likely is that “the federal government will likely attempt to treat cryptocurrency regulation like many investment products currently, with an overarching regulatory system and room for states to add specific provisions.”
The future is unclear, but indeed, the government is slowly gaining its footing in crypto regulations.
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