In terms of the cryptocurrency industry, the U.S. legislative landscape has been remarkedly static.
In the almost 11 months since the former face of crypto, Sam Bankman-Fried, pulled the rug out from under the digital asset sector with his firm’s (and his own) allegedly criminal implosion, only two crypto bills have made it out of congressional committees, one regulating stablecoins and one defining when digital tokens are classified as a commodity or security. Both face stiff opposition.
U.S. Securities and Exchange Commission Chairman Gary Gensler testified before the House of Financial Services Committee Wednesday (Sept. 27) in a Hearing Entitled: “Oversight of the Securities and Exchange Commission,” reaffirming his long-held position that not only are most cryptocurrencies unregistered securities, but most crypto companies operating in the U.S. are doing so noncompliantly.
“Given this industry’s wide-ranging noncompliance with the securities laws, it’s not surprising that we’ve seen many problems in these markets,” Gensler said, adding that, “Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.”
Still, the failure of lawmakers to pass any legislation comes at a time when private issuers are increasingly testing the sector’s waters.
Visa expanded its stablecoin settlement capabilities with Circle’s USDC stablecoin earlier this month (Sept. 5) by adding pilot programs with merchant acquirers Worldpay and Nuvei, while PayPal last week (Sept.20) debuted its PayPal USD (PYUSD) stablecoin on Venmo.
Read more: An American Revolution — How US Crypto Policy Diverges From Rest of World
All Eyes on Bankman-Fried’s Criminal Trial Next Week
Complicating matters in the crypto industry’s search for further go-forward legal clarity is the fact that FTX co-founder Sam Bankman-Fried, who was (in)famously cozy with policymakers, will start his criminal trial next week on Tuesday (Oct. 3).
Industry insiders and observers fear that bringing FTX’s dramatic and fraudulent collapse back into the news, as well as the spotlight on Bankman-Fried’s millions in political donations centered around pro-crypto policies, could remind lawmakers of the sector’s perils, rather than its promise.
“Dear Washington, as much pie is on your face as is on the industry’s face for failure to have acted, to tell a consumer ‘buckle your seat belt’ after FTX is not exactly a good example of regulatory models that protect people or protect markets,” Dante Disparte, chief strategy officer at USDC issuer Circle, said in a report by The Information.
That’s why crypto companies are making special effort to ramp up their own lobbying efforts at the same time as the trial kicks off.
On Wednesday (Sept. 27), Stand with Crypto, a pro-crypto policy group that was formed by Coinbase, hosted an event in Washington along with 50 crypto founders to advocate for legislative clarity aligned with their own goals.
“This is going to be kind of like our 5G or semiconductor moment where in five years, we’ll be thinking, how do we get this back onshore if we don’t do something now,” Coinbase CEO Brian Armstrong said in an interview, noting that 83% of the G-20 countries have “clear rules” on the books for how crypto should be regulated, consumers should be protected, and “how this innovation can happen.”
“Everybody wants to make sure that what they’re doing isn’t going to be erased by the government,” Kara Calvert, head of U.S. policy at Coinbase, said in a Wednesday Reuters report.
Coinbase is currently in the midst of a regulatory battle with the SEC.
Read also: Are the SEC’s Actions an End or an Exorcism for Crypto in America?
Ongoing Obstacles to Crypto’s Progress
As PYMNTS wrote earlier this month (Sept. 5), stablecoins — viewed as more, well, stable than volatile cryptocurrencies and a more viable bridge to the traditional financial sector — are themselves facing a fragmented landscape where they are adopted in some regions while facing restrictions elsewhere, particularly as a battleground is forming with central banks on one side and private issuers on the other.
That’s because, amid a regulatory crackdown, crypto executives say they are now looking outside the U.S. for growth.
Meanwhile, the New York State Department of Financial Services (DFS), a pioneer in regulating digital assets, last week (Sept. 18) published proposed guidance focusing on virtual coin listing and the general framework for greenlisted coins.
So what is the best go-forward strategy for the embattled industry? Amias Gerety, partner at QED Investors, told PYMNTS that “business as usual” is the best choice.
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