Bitcoin Regulations –
by Joff Paradise | 09 Apr, 2022 11:04 am | News
As of Feb 2022, regulations stepped firmly in the forefront of upcoming midterm elections with a new POTUS executive order. The order calls on various government agencies to examine risks/benefits of cryptocurrencies, as well as the exploration of a digital version of the USD.
While the order has put the crypto industry a bit on edge, regulatory clarity has long been anticipated. This executive order may finally bring a unified approach to regulation and oversight of digital assets that will help usher in institutional adoption of bitcoin.
Bitcoin Regulations: USA
The Cryptocurrency Act of 2020 was introduced to the U.S. House of Representatives by Arizona Congressman Paul Gosar (R) after a joint statement from the FinCEN, SEC and the CFTC noting people who engage in digital assets and activity must abide to certain laws. The act seeks to set clear guidelines on how cryptocurrencies are categorized, but has yet to be passed. It proposes three categories:
- Crypto Currencies – Any representation of currency or synthetic derivatives resting on a blockchain or decentralized cryptographic ledger (e.g. Bitcoin or Litecoin), including reserve-backed digital assets (e.g. stable coins).
- Crypto Commodities – Economic goods or services that markets treat without regard for who produced them that rest on a blockchain or decentralized cryptographic ledger (e.g. Bitcoin futures contracts).
- Crypto Securities – Debt, equity or derivative instruments that rest on a blockchain or cryptographic ledger (e.g. initial coin offerings)
If the bill were to pass, it would hand over sole authoritative power to these agencies giving them regulatory control over the assets in their jurisdiction.
These agencies are:
- The Financial Crimes Enforcement Network (FinCEN). They usually regulate banking and money service institutions. They will regulate cryptocurrencies.
- The Commodity Futures Trading Commission (CFTC). Typically regulates the commodities and futures markets and will regulate crypto commodities.
- The Securities and Exchange Commission (SEC) This group usually regulates the securities markets. They will regulate crypto securities.
Public records of all licenses, certifications, and registrations needed to create, issue or trade digital assets will be maintained by The Federal Digital Asset Regulator. FinCEN will work along with the Security of the Treasury to come up with similar rules enforced by financial institutions to trace cryptocurrency transactions, and the IRS to ensure taxation.
The drafting and publishing of their proposed regulations will be the next step. Coin Center’s executive director Jerry Brito says the bill should be opposed in principle if it shows signs of life. Brito criticized Representative Gosar for not being on any committees that will discuss his bill.
Head of operations for TokenSoft Lawson Baker stated that while the bill makes sense on the surface, a deeper look reveals the neat categorizations are possible fatal flaws.
The bill is thought to have little chance of passage. However, according to lawyers and backers in the industry, this latest in what is sure to be many bitcoin regulations provides insight into what new law governing crypto could look like in the future. The Digital Taxonomy Act and Blockchain Innovation Act were rolled into a third bill, the Consumer Safety Technology Act – which was passed by the House, but not the Senate. Bill H.R. 8128 was introduced on Jun 4, 2021 and is expected to have a 3% chance of being enacted.