Legislation Groups For Cryptocurrency Advocacy Will Fight The Good Fight
Despite the recent efforts by the SEC and various States, crypto regulation in the US is still underdeveloped. To date, no significant Federal laws have been established to oversee the crypto space. Therefore, federal authorities are often confused by which of the currently existing laws are applicable to certain incidences.
However, the absence of a designated legislation does not imply that lawmakers are not drafting a legal framework for the regulation of digital currencies. To this end, the Congress has already held two meetings with the heads of SEC and CFTC, Jay Clayton and Christopher Giancarlo respectively. The meetings were convened in March and July this year.
Superficially, the imposition of regulation on the crypto sector may appear to have negative implications, but individual and institutional investors believe that the regulations may positively affect the industry. Their confidence stems from the bad reputation that marred the crypto space due to the lack of clear rules governing the markets.
The Rise Of Self-Regulation Agencies
Actually, the most vociferous proponents for the enactment of crypto regulations are leading participants in the industry. Due to the delayed implementation of such laws, some companies have taken it upon themselves to create their own regulatory bodies. For instance, Coinbase UK, eToro and many other similar entities based in Britain combined to form CryptoUK. On the other hand, Bitcoin billionaires Cameron and Tyler Winklevoss established the Virtual Commodity Organization earlier this month.
Additionally, some key players in the crypto sector resorted to the establishment of a political action committee (PAC) to press Washington legislators into drafting laws that will favor the cryptocurrency industry. Typically, PACs are sued to fund raise and spend money in support of political campaigns. However, nobody knows the goals of the recently created Coinbase PAC.
Although the Coinbase Pac is the most popular of its kind in Washington, it is certainly not the only pro-crypto PAC. According to reports, such movements have been active at the Capitol Hill since 2014. Furthermore, the CNN discovered that Coinbase granted an activist movement known as BIT Pac a $3,000 funding four years ago.
Education Before Law Creation
Also, the Bitcoin Foundation enlisted the services of a DC-based policy firm, Thorsen French Advocacy in 2014. Back then, the foundation’s policy counsel, Jim Harper, said that Congress members who had taken an interest in digital currencies established that the government should create a legislation that harnesses its benefits and mitigates its risks. Jim added that the foundation was lobbying the Capitol Hill so that the Bitcoin Community can focus on improving the coin’s operational infrastructure. By doing this, the community would expand the mass adoption of Bitcoin, ensuring that the world benefits from the enormous potential of the digital currency.
Another notable lobby filed in 2014 was attributed to Brett Stapper, a co-founder of Falcon Global capital. Brett intended to achieve goals similar to the ones set by the Bitcoin Foundation, in that he wanted to create awareness among members of the Congress so that they can legally accept Bitcoin and its derivatives. Stapper noted that if his efforts bore fruit, the Bitcoin ecosystem would benefit massively. Brett, however, added that if the education aspect is not covered, it could result in the enactment of unfriendly regulations.
The Chamber of Digital Commerce, a non-profit organization whose objective is to create a conducive environment for innovations and investments through education, lobbying and working in collaboration with major influencers and regulatory bodies in the sector, was also launched in 2014. Since then, several pro-crypto associations have been created, such as the Congressional Blockchain Caucus. The Caucus, which was established last year, aims to educate lawmakers so that that they pass supportive regulations concerning the cryptocurrency sector.
Federal Crypto Regulation Will Take Time
Nevertheless, the effectiveness of the numerous PACs is yet to be felt. This is because, since their inception, no significant political action has been taken against digital currencies. Moreover, no noteworthy action has been taken in favor of cryptocurrencies, especially by the federal government. Many attribute the lack of activity to the approach taken by the PACs, which places awareness creation before the drafting of the laws.
Recently, Arnold Spencer, the general counsel for Coinsource who previously served as the assistant US Attorney in Texas’s Eastern District, blamed the absence of a crypto regulation framework to the insufficient technical knowledge among legislators. Arnold alluded to a research conducted by Facebook, sang that the lawmakers must grasp the basics of the technology before embarking on the regulation drafting process. In this regard, Spencer predicted that it may take time for the US Congress to formulate a comprehensive legislation concerning the cryptocurrency industry.
The Impact Of Self-Regulatory Organizations
As mentioned earlier, some of the industry participants have established self-regulatory organizations. One of the proponents of this approach, Cameron Winklevoss, recently published a post on Medium highlighting previous incidences where self-regulation has worked. Cameron mentioned the National Futures Association, a self-regulation body for the US derivatives sector, and added that the Virtual commodity Organization will partner with the CFTC to oversee the virtual commodity markets.
Spencer acknowledged that the federal government is wary of the potential ramifications that may ensue due to the regulation of nascent technologies. Therefore, according to Spencer, it is highly likely that the legal enforcement will be imposed ion an incremental manner, one at a time. To this end, he noted that the IRS, CFTC and SEC have already stated enacting regulations.
Indeed, the aforementioned regulatory agencies have initiated measures to enact regulations on digital currencies. Apparently, the meetings between the regulators and the Congress seem to have delegated the enforcement duties to the regulatory agencies, while waiting how the cryptocurrency ecosystem develops over time. Nonetheless, the freedom granted to these bodies has created a regulatory confusion. Earlier this year, the SEC classified ICO tokens as securities, while FinCEN obligated all virtual currencies to conform to general money transmission laws. Later on, a New York-based federal judge ruled that ICO tokens are legally identified as commodities.
State Governments Taking Up The Mantle
As the federal government hesitates, several states are developing crypto regulation laws. Most of these regions are either trying to protect their citizens from the potential risks or creating a favorable environment, or both. For instance, Arizona and Tennessee have approved the use of smart contracts and Nevada has banned blockchain taxation. Alternatively, Hawaii and West Virginia have imposed stringent restrictions on cryptocurrency transactions. New York is the obviously the most advanced state regarding crypto regulation. However, its BitLicense initiative has been under constant criticism for inhibiting the growth of small-scale startups.
Evolving Industry Is Good For The Slow Regulations
Regardless of the efforts taken by various states, as well as the many advocacy organizations, it will take years for the federal government to adopt a comprehensive cryptocurrency regulation framework. Although the confusion is inevitable, experts are confident that this could have positive effects, at least in the long term. To put this into perspective, Kathryn Haun, a Stanford professor who works with Coinbase, said that if the law had been approved in 2016, the soaring of ICOs would have already made it irrelevant. Therefore, the best approach is waiting to see what happens.