Biden and crypto
The Biden Administration announced on January 27th that it will launch a new legal framework for cryptocurrencies in the coming months to combat the multiple cryptocurrency scams that impacted the crypto market last year, causing multi-million dollar losses. According to a statement published by the White House, “2022 was a tough year for cryptocurrencies,” hence this new regulatory framework aims to ensure that cryptocurrencies cannot undermine the financial stability of the United States.
Among the measures that the U.S. Congress may take to “redouble its security efforts” through the new cryptocurrency regulatory framework are: expanding the powers of regulators to prevent the misuse of assets, strengthening transparency and disclosure requirements for crypto companies, and toughening penalties for violating rules on illicit financing, among others. Additionally, it seeks to protect investors through new “liability requirements” for those who commit criminal acts. Although these measures are not currently 100% contemplated in the new regulatory framework, they demonstrate that regulators will not tolerate malicious actors going unpunished.
Strong against crypto
The release has a pretty strong tone against crypto, but among the measures that could be approved, the financing of additional training for law enforcement, including international partnerships, stands out. The White House emphasized that President Biden is working to avoid new scams similar to the FTX scandal, perpetrated by the former CEO of the company, Sam Bankman-Fried, through which thousands of Americans lost billions of dollars, according to court filings.
In order to achieve this goal, the Administration will also be taking steps to strengthen the regulatory structure around digital assets and cryptocurrencies, including strengthening the Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, as well as the implementation of other measures to protect consumers and investors. The White House also highlighted that it will work with Congress to provide additional regulatory oversight and enforcement tools to better protect American consumers and investors.
What is the goal?
The goal is to create a safe and transparent environment for the growth and development of the digital asset and cryptocurrency industry. The Biden Administration’s announcement is a clear sign that the U.S. government is committed to protecting American investors and consumers from fraud and financial crime and is also actively working with international partners to combat the illicit use of cryptocurrency.
The views on how to deal with crypto among the Democrats and Republicans differ significantly. Pro-crypto U.S. Senator Pat Toomey has left a parting gift for Congress before he retires. On Dec. 21, he filed the “Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,” also known as the “Stablecoin TRUST Act of 2022.” The Republican has advocated for progressive legislation that does not stifle fintech innovation or send crypto companies overseas. However, his counterparts, Senators Elizabeth Warren and Sherrod Brown, want to ban the asset class entirely.
The stablecoin act aims to authorize licensed entities such as depository institutions, state-based money-transmitting businesses, and national trust banks to issue stablecoins. It also proposes the establishment of new, standardized public disclosure requirements for all payment stablecoin issuers. The bill wants to keep stablecoins out of traditional finance and, as such, classify them as non-securities. Consumer protection is also provided with a clarification that stablecoin holders would have priority in the event of an issuer’s insolvency.
Stablecoins currently represent 16.5% of the entire crypto market capitalization, with around $140 billion in them. Tether’s USDT remains the market leader, with a share of 47%. It is clear that the Biden Administration is committed to protecting American investors and consumers from fraud and financial crime, but the path forward for crypto regulation is