US voters gave a ‘pro-crypto’ mandate—what happens now? | Opinion

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As a seasoned compliance professional with over 14 years in the global financial services industry, I’ve seen my fair share of regulatory uncertainty and enforcement actions. But the recent wave of pro-crypto leadership in the US has filled me with cautious optimism. With a background in anti-money laundering compliance and financial crime prevention for crypto and FinTech organizations, I believe that this shift towards regulatory clarity and constructive dialogue is long overdue.

Following numerous years of regulatory ambiguity and increased regulatory actions, American voters have made it clear: It’s time for a fresh perspective on crypto regulation. This viewpoint has been consistently shared throughout both executive and legislative branches, with approximately 292 candidates advocating for crypto being elected to the legislature. This surge of pro-crypto leadership has sparked cautious optimism within the industry, reinforced by an increase in institutional and retail adoption following the elections.

If the new government follows through on its campaign pledges, the U.S. might regain its status as a leading force in crypto innovation. Yet, the road ahead is not without hurdles. The European Union’s Markets in Crypto-Assets Regulation, due to begin implementation on December 30, will establish a broad regulatory structure, which could surpass the U.S. in providing clarity to crypto businesses. To retain its dominance, the U.S. should leverage this opportunity to develop a regulatory system that achieves a delicate balance: one that encourages innovation while protecting consumers and investors. This may involve shifting away from the reactive enforcement strategies of the past and adopting a more forward-thinking, principles-based approach instead.

The turning point

Since 2017, the U.S. Securities and Exchange Commission (SEC) has primarily resorted to taking enforcement actions to tackle what they perceive as regulatory loopholes within the cryptocurrency sector. This strategy, albeit noble in its intent, has led to a considerable amount of ambiguity. In the year 2023, the SEC took on 46 enforcement cases – a 53% surge from the preceding year, underscoring the inefficiency of applying traditional financial rules to an industry that’s rapidly changing.

Modern suggestions, for instance, giving the Federal Reserve control over stablecoin issuers as ‘depository institutions,’ highlight the conflict between conventional regulatory structures and cryptocurrency’s distinct traits. Stablecoins, such as Tether (USDT) and USDC (USDC), benefit from their adaptability and worldwide influence, qualities that don’t easily fit within the constraints of traditional banking rules.

It appears that the latest election results indicate a change in public opinion. The voters seem to be expressing a desire for clear regulations and improved communication between legislators and the cryptocurrency sector, favoring a more cooperative approach.

Momentum for change

In Ohio, a significant change took place as Republican Bernie Moreno, supported by major players in the cryptocurrency industry like Coinbase, Ripple Labs, and Andreessen Horowitz, managed to oust incumbent Democrat Sherrod Brown, who is well-known for his critical views on crypto. This demonstrates the increasing impact of the cryptocurrency sector on political decisions.

As Gary Gensler’s term as SEC Chair nears its conclusion in January, there is anticipation for a new leader at the agency, possibly Dan Gallagher, who advocates for balanced regulation. His practical outlook and background could potentially provide a bridge between fostering innovation and safeguarding investors.

Brian Armstrong, CEO of Coinbase, remarked that this is America’s most pro-crypto Congress ever. This optimism is justified, as Congress appears poised to revisit critical legislation like the Digital Commodities Consumer Protection Act (DCCPA). If passed, this bill could grant the Commodity Futures Trading Commission a more prominent role in overseeing digital asset markets, reducing the SEC’s outsized influence and providing much-needed regulatory clarity.

Balancing innovation and regulation

The prospect of pro-crypto laws is exciting, but legislators need to move cautiously to steer clear of excessive regulations. For instance, the MiCA framework from the EU has faced criticism for its perceived risks to the system and potential suppression of innovation due to strict rules imposed on specific crypto assets and markets.

In a similar vein, recent steps taken by French authorities to restrict platforms like Polymarket serve as a reminder that using old-fashioned regulations for emerging technologies can pose risks. These efforts, intended to safeguard investors, could unintentionally impede market expansion and curtail consumer options.

As a researcher, my aim is to advocate for a regulatory framework in the U.S. that nurtures innovation, stimulates competition, and simplifies market entry for both fledgling startups and established institutions within the cryptocurrency sector. By cultivating a climate of trust and transparency, legislators can safeguard consumers without unduly restraining the dynamic spirit of entrepreneurship that powers this industry.

A bright but uncertain future

At a crucial juncture, the United States finds itself with a forward-looking pro-cryptocurrency stance. The chance to reestablish its dominance as a pioneer in financial advancements is ripe, yet the way forward is still undecided. The key to success lies in the readiness of policymakers and regulators to foster collaboration, prioritize clear guidelines, and cultivate an environment that harmoniously blends innovation with strong consumer safeguards.

Moving forward, it’s evident that the prospect of cryptocurrency in the United States is vast. However, whether this potential becomes a reality hinges on the decisions made in the near and distant future.

Manfred Bekeris

Manfred Bekeris is a seasoned professional in the field of compliance, currently holding the position of Chief Compliance Officer at Paxful. With over 14 years of experience in the international financial services sector under his belt, he has established himself as an authority on anti-money laundering compliance and preventing financial crimes within crypto and FinTech businesses. His portfolio includes successfully designing scalable compliance programs, spearheading global regulatory initiatives, and improving existing compliance systems.

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2024-12-06 15:14