US Government Still Struggling with Regulatory Harmonization for Cryptoassets
TLDR – Rep. Maxine Waters’ (D-CA) mid-June 2021 announcement that House Democrats formed a working group focused on cryptocurrencies is only one of many, often competing, efforts by politicians and regulatory bodies within the US Government seeking to enhance transparency, consumer security and regulatory clarity for US consumers and the US cryptoasset economy.
Halfway through 2021, the Biden Administration has yet to offer a definitive approach to addressing cryptoasset regulations, including harmonizing definitions and guidance across the different Federal regulatory bodies responsible for crypto. On 15 June 2021, during a hearing before the House Financial Services Committee’s fintech tax force, Representative Maxine Waters (D-CA) said that House Democrats had formed a cryptocurrency working group “to engage with regulators and experts to do a deep dive on this poorly understood and minimally regulated industry.”
Waters’ announcement comes on the heels of other legislators’ complaints, including that of US Senator Elizabeth Warren (D-MA), who during a separate Senate subcommittee hearing, focused on bitcoin (BTC), citing its price volatility, lack of consumer protections and its facilitation of ransomware attacks, among other criticisms. Often, US Government critics cite the fear of runaway money laundering and other potential illicit uses as a key driver for stronger oversight.
Cryptocurrency critics unfailingly neglect to mention the huge amounts of laundered money that courses through the traditional global financial system every year. At the end of 2020, the total volume of major cryptoasset thefts, hacks and frauds totaled $1.9 billion – a not insignificant amount, especially to the individual victims of crypto crime.
Comparatively, as noted in blockchain analytics firm CipherTrace’s Cryptocurrency Crime and Anti-Money Laundering Report, the United Nations Office of Drug and Crime estimates the amount of fiat money laundered globally in one year to be between 2-5% of global GDP, which would total from $800 billion to $2 trillion. This estimate of fiat-based global money laundering ranges from 63% to 154% of the market capitalization of the global cryptoasset market, which as of the date of this article, stood at $1.3 trillion.
The US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and other regulatory bodies and related officials have all announced working groups of one kind or another seeking to harmonize definitions and US regulations regarding cryptoassets.
One notable bill pending review in the US Senate is H.R.1602 – Eliminate Barriers to Innovation Act of 2021, drafted by members of the bipartisan Congressional Blockchain Caucus. This relatively short piece of legislation aims to form a working group whose focus, over the course of a year of study, is the development of harmonized regulations that would both provide transparency and stability to the cryptoasset economy with the explicit goal of fostering rather than stymieing innovation.
With additional US Congressional hearings slated over the next month or so, this does suggest a significant amount of momentum behind finally addressing cryptoassets in a significant and systemic way in the US; and this is representative of a broader global interest in enhanced regulations.
2021 could very well be a watershed year in global regulations on cryptoassets.
CipherTrace’s Cryptocurrency Crime and Anti Money Laundering Report can be found here:
Decrypt article covering Maxine Waters’ announcement:
Coindesk article suggesting the US is at a new stage of regulatory awareness regarding crypto:
Congress.gov direct reference to H.R. 1602: