Crypto regulation recap - Harvard Blockchain Conference
Regulatory authority, changes on the Hill, and the future
Hi all.
This week, I’m continuing my travels to the Harvard Blockchain Conference. It’s been an exciting few days in Boston with leaders in the crypto space talking about pressing issues, latest developments, and their predictions for the future.
To no surprise, one of my favorite panels focused on crypto regulation. The panelists included:
Chris Robins (Goldfinch)
Susan Friedman (Ripple)
Sujit Raman (Sidley Austin)
Tyler Lindholm (Sen. Lummis’ Office)
Yulia Guseva (Rutgers Law)
I want to dive deeper into some of the issues brought up by these individuals in later newsletters, but, for now, here is a recap of their discussion at a more macro level.
Enjoy and see you next Sunday!
-Katja
Crypto regulation recap - Harvard Blockchain Conference
The panel on crypto regulation really highlighted some of the core issues around domestic crypto regulation concerns. I’ve discussed some of the ideas in previous newsletters, but I thought writing this recap would underscore what industry leaders are thinking and feeling about the current regulatory landscape.
Who should have regulatory authority?
The SEC and CFTC have served as the two main authorities over crypto regulation. However, the question of who should have a say over what remains. As some panelists pointed out, the SEC has the right to take enforcement action over broader regulations (such as definitions like those concerning securities), while the CFTC should focus on how the assets are used. Within this perspective, the CFTC can be thought of as pro-innovation and driven by principles, whereas the SEC focuses more on investor protections and is driven by rules and enforcement.
The two agencies are fundamentally different but have been using the same tools (pre-crypto laws) for looking at crypto regulation. This contributes to a fragmented system, which one of the panelists compared to a Jackson pollock painting.
Changes on the Hill
Recently, the Hill experienced a significant shift in tone regarding crypto. It developed an eagerness to learn and engage with the crypto industry. This is a great start but Congress needs to understand the ecosystem and do more to get the information it needs to pass the most effective legislation. Right now, it seems that many proposals are only half-thought through, which is a reason why many offices are scrambling to hire a crypto staffer.
In addition to this eagerness, crypto is beginning to bridge the partisan gap. For example, a bipartisan letter was issued from the House about some of the more intrusive policies, like those that were included in the Infrastructure Bill.
A nuance to this may come from the recent executive order issued by President Biden. Although many saw this as the right step forward, some remain skeptical. For one, the order painted central bank digital currencies (CBDCs) in a favorable light, which could drive a partisan wedge. Outside of that, the order may just be seen as a nudge, since it is still Congress’s job to pass legislation.
Because of how quickly technology develops, one year in crypto equates to ten years in traditional finance. This means that crypto regulation isn’t moving fast enough and, in fact, has fallen behind. Recently, the EU passed the Markets in Crypto Assets (MiCA) regulatory framework that surpassed any US federal legislation to date. Congress should look at the EU with its proactive legislation, and turn itself into a legislative lab: it needs to start implementing and adjusting instead of looking for an end all solution before taking action.
As part of this dialogue, Congress needs to look to the state level, which has shown some of the quickest and best solutions to crypto issues. For example, Wyoming’s transmitter license allows for crypto actors to comply with laws while moving forward with developments. This has already brought some of the largest crypto startups to the state.
Focus for the future
2022 will be not just the year of Congress but it will be the year of interagency coordination and cooperation. The focus needs to stay on mitigating redundancies and overlaps to make legislation more cost efficient, proactive, effective, and (most importantly) clear.