HOW THE U.S. WILL TRY TO REGULATE CRYPTOCURRENCY
A series of new legislative and enforcement actions against some digital asset spaces and their stakeholders have provided important insight into how the U.S. cryptocurrency scene could unravel in the future.
The White House’s new regulatory framework for cryptocurrencies and the reports they have contributed to give us a new perspective on how the U.S. government intends to legislate on digital assets.
Key factors about crypto regulation in the US
- The White House’s new cryptocurrency framework demonstrates that regulation is coming to the digital asset space.
- The SEC wants to regulate Ethereum transactions within the U.S. because there are more Ethereum nodes located in the U.S. than in any other country
- Several cryptocurrency projects could face enforcement action under recently proposed regulatory guidelines.
- Regulation of cryptocurrencies is coming to the United States, and changes are likely to happen in the future of the industry.
How does the U.S. contemplate regulation of crypto assets
Through several reports issued in recent months, information has been issued on how the U.S. government intends to regulate cryptocurrencies. Some important positions in the country such as Treasury Secretary Janet Yellen have clearly called for regulation on digital assets linked to the dollar.
After the collapse of the TerraUSD stablecoin in May, several members of Congress pledged to draft a regulatory framework for stablecoins with the intention of protecting U.S. investors. Thus, non-bank stablecoin issuers would register with the Federal Reserve.
In July, the SEC accused cryptocurrency exchange Coinbase of listing “at least nine” tokens that it believes should be classified as securities. It also emerged that it is making some investigations into all U.S.-based cryptocurrency exchanges after SEC Chairman Gary Gensler revealed that he believed several platforms were violating securities laws by trading with their own customers.
However, most of the information on potential cryptocurrency enforcement comes from the White House, which early last month released the first-ever cryptocurrency regulatory framework. In which it specifies how different government agencies would oversee the growth of digital assets and focus on objectives such as fighting financial crime.
Arguments for Enforcement
The SEC tries to establish some control over the industry by making arguments that can have dangerous consequences for the transaction of some assets.
That is, he has argued that Ethereum transactions should be considered as “taking place” within the US because there are more Ethereum nodes located in the US than in any other country. For that reason, says the SEC, Ethereum should be under its jurisdiction. If the court accepts this argument, the SEC could seek to establish jurisdiction over all Ethereum transactions involving tokens it considers securities, regardless of the location of the transaction counterparties.
As a result, the move to correct the Tornado Cash privacy protocol stands out as one of the major actions that has had some very notable consequences in the sector. This was the first time a government agency has sanctioned a smart contract and several key blockchain infrastructure providers have taken a stand against the sanctions.
How could this end?
Finally, the move to sanction the Tornado Cash protocol for decentralization and privacy stands out as an application that has already had a major effect on the sector. This is the first time a government agency has sanctioned a smart contract (code that lives on the blockchain) and several blockchain infrastructure providers such as Infura, have complied with the sanctions.
Several crypto legal experts, such as Coin Center, consider this an unconstitutional move and will likely challenge it in court. Still, if the Treasury wins the lawsuit, the entire crypto economy would suffer, putting in doubt its ability to uphold its core principles, such as decentralization, credible neutrality and censorship resistance.