There has been a lot of buzz about regulations around cryptocurrencies recently. As governments around the world grapple with how to treat cryptocurrency, many have turned to hearings to try to better understand the landscape. However, these hearings often leave us with more questions than answers.
One of the biggest issues with these hearings is that they are often led by people who do not fully understand the intricacies of cryptocurrency. While they may be experts in their fields, they may not have the understanding or experience necessary to truly understand how these digital assets work. This can lead to misconceptions and misinformation being spread, which only contributes to the confusion and uncertainty around cryptocurrency.
Furthermore, there is a lack of consensus amongst regulators about how to classify cryptocurrency. Some see it as a currency, others view it as a commodity, and still others believe it should be treated as a security. This lack of agreement makes it difficult to create a clear and consistent framework for regulating cryptocurrencies.
Another issue with these hearings is that they often focus on the potential risks of cryptocurrency without considering the potential benefits. While it is true that there are risks associated with cryptocurrency, such as volatility and the potential for fraud, it is also true that there are many benefits to using these digital assets. Cryptocurrencies can provide a means of transfer that is fast, cheap, and secure. They can also provide financial inclusion for those who are underbanked or unbanked.
Additionally, there is a risk that over-regulating cryptocurrency could stifle innovation and growth in the industry. Cryptocurrency is still in its early stages, and it is possible that the technology will evolve and improve over time. If regulations are too strict, it could limit the potential for growth and development.
Another issue with regulatory hearings is that they often focus on individual cryptocurrencies instead of the technology as a whole. While it is important to understand the specifics of each individual cryptocurrency, it is also important to consider how the technology as a whole is evolving and changing. By only focusing on individual cryptocurrencies, regulators may miss key trends and developments that could have a broader impact on the industry.
Ultimately, regulatory hearings are not enough to fill the gaps in cryptocurrency regulation. While they can be a useful way to gain a better understanding of the issues, they are not enough to create a consistent and effective framework for regulating cryptocurrency. This requires a coordinated effort between governments, regulators, and industry stakeholders.
To effectively regulate cryptocurrency, we need to first establish a shared understanding of what it is and how it works. This requires education and collaboration between different stakeholders, including regulators, industry experts, and academics. Once we have a shared understanding, we can begin to develop a framework that is both effective and flexible enough to adapt to changes in the industry.
In order to achieve this, we need to take a collaborative approach to regulation. This means involving all stakeholders in the process and working together to find solutions that work for everyone. It also means taking a balanced approach, looking at both the risks and benefits of cryptocurrency and ensuring that any regulations put in place do not stifle innovation or growth in the industry.
Finally, we need to recognize that regulation alone is not enough to ensure the safe and effective use of cryptocurrency. It is also important for investors and consumers to educate themselves about the risks and benefits of using cryptocurrency and to take appropriate measures to protect themselves.
In conclusion, regulatory hearings are an important part of the process of understanding and regulating cryptocurrency. However, they are not enough to fill the gaps in regulation. To effectively regulate cryptocurrency, we need to take a collaborative, balanced approach that involves all stakeholders and considers both the risks and benefits of cryptocurrency. Only by working together can we ensure the safe and effective use of this exciting technology.
Congress recently shifted its focus from cryptocurrency to “digital assets” and held two hearings on April 27, 2022, to discuss creating a viable market structure supported by clear rules for regulation. The Digital Assets, Financial Technology, and Inclusion Subcommittee, as well as the Commodity Markets, Digital Assets, and Rural Development Subcommittee, conducted the hearings, but there was little consensus on how to move forward.
Private sector financial services leaders such as Visa and J.P. Morgan (JPM) are making moves to jumpstart their own digital asset roadmaps. Visa’s roadmap includes stablecoin payments, while JPM is looking to tokenize traditional finance. It’s clear that entrepreneurs, developers, and job creators need proper regulatory clarity and certainty to operate their digital asset businesses on US soil.
The joint effort between the House Financial Services Committee, the House Agriculture Committee, and the two chairs of the respective Digital Assets subcommittees aims to find workable solutions that provide much-needed regulatory clarity while adhering to time-tested principles that protect market participants. The two congressional committees plan to hold a joint subcommittee hearing next month to craft legislation meant to provide regulatory clarity and certainty.
The European Union (EU) has already passed landmark regulatory frameworks designed specifically to help legally integrate cryptocurrency into its marketplace. Congress needs to provide much-needed direction to the regulatory agencies, including the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC), who currently disagree on the classification of many digital assets, which is unworkable for entrepreneurs and consumers.
Three witnesses testified during the hearing, discussing the classification of digital assets in the financial industry. Hilary Allen, a professor at American University who teaches banking and securities law, said that all assets are already digital. Zach Zweihorn, a partner at the Washington, D.C., law firm Davis Polk & Wardwell who specializes in securities regulation, added that classifying a digital asset would likely need to include a utility threshold.
Daniel Gorfine, who once served as the chief innovation officer for the CFTC, argued that the term “digital assets” is broad and needs to be more clearly defined. He added that regulations look at what an asset is because some digital assets may fall outside of both commodity and security definitions.
SEC Chair Gary Gensler argued that the vast majority of crypto tokens are securities, and this is not incompatible with securities laws. He stated that calling oneself a decentralized finance (DeFi) platform is not an excuse to defy the securities laws.
Congress needs to apply a deep dive into the digital asset ecosystem’s regulatory environment and lead it in the right way. Legislators need to take responsibility for creating a functional framework for the industry to support digital asset innovation in the United States.
Overall, this joint effort by Congress offers hope to businesses who need clear rules and regulations for digital assets. As private financial service leaders continue to secure their positions in the crypto space, congressional rulings to create opportunities and freedom in the financial sector will be essential. The future of digital assets may still be uncertain, but Congress’s efforts to understand and regulate these new assets are a significant step in the right direction.