Digital currencies are being traded every day, and the industry could have macroeconomic consequences upon mismanagement.
Approaches to cryptocurrency regulation recommend the replacement with a framework that has worldwide coordination.
The White House and cryptocurrency regulations
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President Joe Biden acknowledges the magnitude of the possibilities in the crypto-verse. The White House commits to research the currencies and engages various departments to collude in forming a regulatory framework for digital currencies. The approach addresses the risks and benefits of the assets within their technology framework via an Executive Order.
Jeremy Allaire is a steering committee member of the World Economic Forum Digital Currency Governance. He states that the Executive Order instructs dynamism as a valuable solution to the studied risks. This is in line with the legalities of the financial system and Web 3. The initiative covers the privacy, security, global competitiveness, and financial inclusion of USD. The need for the White House to regulate the industry is due to the magnitude and significant growth of digital assets. Therefore, a globally coordinated approach is necessary considering the regulations available and the industry size. The Time Magazine also talks about Bidens latest executive orders, that seems to be a big step in the right direction according to them.
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Is cryptocurrency regulation necessary?
Diversity surrounding the financial system raises concerns about systemic stability. Cryptocurrency indicates that the investor’s attention is split between the stock market and cryptocurrencies. Did you know that you can trade stocks with crypto? It’s called tokenized stocks.
There is a risk to the financial stability in all economic markets with the interconnectedness of crypto assets. The nature of the technology for crypto lists is the facilitation of cross-border transactions that do not need any financial intermediaries. Thus, there is a need for regulation of the anonymity in cryptocurrency trade and the uncertainty it causes in the taxation department. The policy concerns are necessary as digital assets threaten global financial stability.
Why should the United States regulate cryptocurrency?
Biden’s administration’s executive order to develop a national policy on crypto and digital assets sets the base on financial regulations. Other states are moving forward with their regulations on cryptocurrencies and the United States should act on it.
These regulations will help ward off fraudulent activity within digital assets. It requires a different structure to regulate its market since it is a different type of financial currency. Investors are concerned about fraud and manipulation. Their concern centers around how there are rules that protect investors but do not damage markets.
What next for cryptocurrency regulations?
The invitation-only cryptocurrency council of the World Economic Forum Global Future Council is concerned about the lack of regulation of the all cryptocurrencies with international coordination.
Different central banks and regulators observe the trend and aim to stabilize their monetary systems. It stimulates innovation and economic growth. China and El Salvador are already evaluating and executing different options for their regulatory framework. India has amended existing laws, and Liechtenstein has proposed bespoke methods. The EU and UAE propose setting up new regulators.
The White House’s Executive Order is a good step on the right path toward cross-agency collaboration. Global coordination contributes to international cooperation around the regulation of cryptocurrencies.
The United States Regulatory Framework
US Senators are set to introduce a comprehensive framework to regulate the crypto industry. Senator Gillibrand describes the framework as complex and that it will have an intensive review of different aspects of the industry.
The regulations state that some will be regulated under the Commodity Futures Trading Commission (CFTC) while others under the Securities and Exchange Commission (SEC) to understand the issues and make a fair judgment.
CFTC will have a more significant role under the new crypto framework as Senator Lummis regards Bitcoin and Ether as commodities. However, there are disagreements among the senator from Wyoming that claim that not all cryptocurrencies are commodities and that they will use the old Howey Test to define what is a security and what is a commodity. Other mentions in the framework will address central bank digital currencies and stable coins in the bill.
Conclusion
Cryptocurrency regulations in the United States will rely on the stance of the senators and the White House Executive. The outcome of their collaboration will assist in getting relevant regulations that boost their stance in the global financial world. Crypto lists gives constant updates on the events surrounding these regulations to assess what is next for the crypto-verse.
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