Laden...
| Examining the intersection of cryptocurrency and government By Nikhilesh De Managing Editor, Global Policy & Regulation March 15, 2022 Was this newsletter forwarded to you? Sign up here. Supported by
Hey folks,
Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De.
The federal government is coordinating its approach to digital assets, with different agencies and departments tasked with writing reports.
If you’ve got thoughts or questions on what I should discuss next week, or any other feedback you’d like to share, feel free to email me or find me on Twitter. You can also join the group conversation on Telegram. —Nik
'Whole-of-government' (Hannah Beier/Bloomberg via Getty Images)
The narrative U.S. President Joe Biden announced a “whole-of-government” approach to regulating digital assets in a sweeping executive order directing various government agencies and departments to answer specific questions about cryptocurrencies and blockchain. Why it matters This was perhaps the biggest story in the U.S. cryptocurrency world last week. The White House ordered the government to get to work on understanding these magical internet beans. If last year’s infrastructure bill wasn’t enough evidence that crypto is no longer a niche area, last week’s order should put any further doubts to rest. Breaking it down President Biden unveiled his executive order on digital assets last Wednesday.
Allow me to show you what my inbox looked like after: (Thomaswm/Wikimedia Commons) Well, folks, it’s finally here: A sitting U.S. president signed an executive order addressing the cryptocurrency industry. And no one hated it?
Seriously, as far as I can tell, this thing’s received near-universal praise. The critiques are along the lines of “it didn’t go far enough” or that it doesn’t actually answer any of the major outstanding questions. But by and large the reception has been pretty positive.
You can read the text of the order here (and my write-up with color from administration officials here); industry reactions here; government official comments here; non-U.S. reactions here; implications for crypto miners here; and central bank digital currency implications here.
I don’t want to get political, but it is worth marveling for a moment at the fact that we went from a president who once tweeted he wasn’t a “fan of bitcoin” to one who signed a formal document saying the crypto industry is growing, it must be monitored, guidelines should be put in place and the U.S. should be a leader in responsible innovation within the digital asset sector.
The real question is whether this actually means anything.
On a practical level, the executive order is more or less telling agencies to keep doing what they’re doing. Treasury Secretary Janet Yellen basically said as much (“This work will complement ongoing efforts by Treasury.”) in a statement published to accompany the order.
The order also more explicitly defines the roles of the Commerce Department and National Security Agency in crypto regulation. There are a number of reports (some of which are not referred to as reports) that the various departments will have to produce over the next six months or so.
This isn’t explicitly stated, but it seems to me that one of the main goals is to do away with the state/federal bifurcation of crypto regulation (for those of you who don’t follow this regularly: crypto exchanges are by and large regulated at the state level as money services businesses/money transmitters, while derivatives and tokens that might be seen as securities are regulated at the federal level. There's more to it than that but this is a quick tl;dr).
The key here, I think, will be seeing how these reports are used. Regulatory agencies and government wings like the Treasury Department have already announced guidance or sought specific legislation. The Federal Reserve, for example, has said on numerous occasions that it wants Congress to pass a law authorizing the creation of a central bank digital currency before it will consider issuing a digital dollar.
More reports may lead to more specific recommendations, but that will depend entirely on Congress or the executive branch departments and how they utilize these recommendations. It’s as likely that we’ll continue with the current status quo as it is that we’ll see changes at this moment in time.
Basically, I think it’s too early to have any idea what sort of real impact this might have on a practical level. We might see some consolidation of regulation and a move away from the state/federal split, or we might not. Both seem equally likely at this time.
Because of this, the argument that the directive doesn’t mean a lot makes a certain amount of sense.
On a symbolic level, though, this executive order seems massive.
“The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system and the climate. And, it must play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness,” a White House fact sheet announcing the directive said.
The order also addresses concerns we’ve heard about digital assets – that they might lead to financial instability or harm consumers. Once again, the order directs agencies to study these issues.
At no point does the order specify the regulations the administration wants these departments to take.
Next steps: Watching for the reports to roll in.
Banning proof-of-work I took a few days off and apparently missed a Whole Thing in Europe.
The headline is that Europe’s Markets in Crypto Assets (MiCA) regulatory framework is one step closer to adoption. As a quick refresher, this years-in-the-making proposal would create a common regulatory framework for crypto companies trying to conduct business in any of the European Union’s 27 member nations. My colleague Sandali Handagama has a more in-depth explanation here.
Yesterday, the European Parliament’s Economic and Monetary Affairs Committee voted to advance a draft of this legislation, which includes provisions for blocking market manipulation and illicit activities, as well as creating a license that a company could seek in one country which would be applicable in the other EU nations.
This seems a pretty significant step, but one could be forgiven for thinking this is the MiCA news that dominated headlines. Guess not.
Sandali again: “The latest draft of the European Union's (EU) proposed legislative framework for governing virtual currencies, Markets in Crypto Assets (MiCA), still contains a provision that could limit the use of proof-of-work cryptocurrencies.”
Different drafts of the MiCA legislation included different provisions to limit the impact proof-of-work cryptocurrencies would have on the bloc’s energy usage.
Now, to be clear, the energy concerns have been and continue to be pretty real. Europe in particular is probably grappling with questions around how it might be able to source energy should the EU or U.S. try and implement sanctions on Russian oil, a key source of oil and gas across Europe.
Blocking cryptocurrencies deemed to be “wasting” energy is pretty low-hanging fruit as far as Things They Can Do go.
Sandali reported the vote was too close to call on Sunday, and on Monday the provision was struck from the bill.
The legislation will now go to other EU groups for further negotiations and debate. Studying blockchain U.S. President Joe Biden signed a $1.5 trillion omnibus spending bill including, among other things, additional support for Ukraine.
Buried in the legislation were two interesting provisions. One would require companies to report crypto ransomware payments. This stems from last year’s prominent ransomware attacks, which impacted several critical services, including oil pipelines and meat processors.
Another provision apparently orders the Director of National Intelligence (DNI) to brief Congress on cryptocurrencies and blockchain.
According to text of the bill:
(a) BRIEFING.—Not later than 90 days after the date of the enactment of this Act, the Director of National Intelligence shall provide to the congressional intelligence committees a briefing on the feasibility and benefits of providing training described in subsection (b).
As far as I can tell, this is the version of the bill signed by the president. So we should see this training happen sometime in June. I have no other details at this time – including who included this provision – but I’ll keep an eye on it.
PolyTrade is a DeFi stable coin lending protocol that helps small and medium size businesses in developing economies meet their working capital needs by tokenizing real-world invoices and bringing them on-chain into the DeFi space. Built on the Polygon ecosystem, PolyTrade is the first-ever bridge between DeFi and TradeFi, with an objective to accelerate the transition to a digital, modern and interconnected ecosystem. It leverages new models to achieve inclusivity while closing SMEs’ funding gaps and simplifying processes that inhibit the trade industry’s progression. “The trade industry is facing a $1.7+ trillion gap in trade finance availability exacerbated by the impact of the COVID-19 pandemic”, says Piyush Gupta, CEO PolyTrade. He further adds, “PolyTrade’s protocol would enable smart receivables financing connecting buyers, suppliers, insurance service providers and investors on a unique platform. While unleashing the locked-in liquidity within stagnant invoices, Polytrade is enabling SMEs to improve their working capital management.
The Biden Bunch Changing of the guard Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) Securities and Exchange Commission Commissioner Allison Herren Lee will depart the securities regulator once her successor is confirmed. Her term expires this year but she can keep serving until the Senate votes to approve her replacement. The New York Times’ DealBook first reported the departure.
Welcome to Celsius, your new home for crypto. We help over a million customers worldwide to find the path towards financial independence by allowing every person access to fair, rewarding, and transparent financial services.
With Celsius, you can easily: Buy coins stress-free Swap between crypto seamlessly Earn weekly rewards safely Borrow cash in 4-easy stepsAnd much more. Download the Celsius app and start your journey to financial freedom today.
Elsewhere Ukraine Has Received Close to $100M in Crypto Donations: Ukraine received nearly $100 million in crypto donations as of last Wednesday, Amitoj Singh reports. As previously reported, crypto funds are going to purchase things like bulletproof vests and night vision goggles. This Tiny Blockchain Startup’s Tangle With SEC Could End Up as Landmark Case: The U.S. Securities and Exchange Commission (SEC) sued blockchain startup LBRY last year on allegations it offered an unregistered securities offering. Lawyers watching the case play out in court believe it might be significant as a precedent, Angelique Chen reports.
Beyond CoinDesk (Financial Times) FT has a fascinating and in-depth feature on the unwinding of Diem (formerly Libra). The short version: Libra’s ties to Facebook ultimately doomed it. (The Verge) This profile of Justin Sun is worth a read. Sun responded by tweeting that the profile has falsehoods and that he had engaged Harder LLP, the law firm Binance tapped to sue Forbes. (Politico) Politico has an interesting feature today on how Democratic lawmakers are approaching crypto assets philosophically.
Today’s Tweet
State of Crypto A newsletter from CoinDesk Were you forwarded this newsletter? Sign up here. Copyright © 2022 CoinDesk, All rights reserved. 250 Park Avenue South New York, NY 10003, USA |
Laden...
Laden...
