Harriet Christie of MirrorWeb reflects on a turning point in US crypto regulation, where it is and what it means from a regulatory compliance perspective.
After a year of intense highs and lows in the crypto market, in March 2022 there was increasing speculation about a White House Executive Order (EO) that was supposedly imminent. US President Joe Biden Signed the document on March 9, in what many saw as a potential turning point for the industry.
However, the turnaround of legislation is a painstaking process. Months later, there is still a degree of uncertainty about the ultimate ramifications of the order.
Draw a line in the sand
The first thing to acknowledge is that the March EO was by no means an exhaustive file of rules and regulations that crypto companies must now adhere to. On the contrary, it contained more questions than answers.
This was not surprising to many, as if he was expect that “Postpone his administration’s game plan”, conversely, Biden was not expected to delve into specific proposals.
The EO advocates measures to meet a number of specific objectives, instead of establishing what those measures should actually be. These goals include developing policy recommendations to protect U.S. consumers, investors and businesses, and exploring options for, among others, a US central bank digital currency.
A constant is that the language is more exploratory than definitive. The administration seems to be asking the ministries to put their heads together to develop the best possible solution for a relatively new, challenging proposition.
What the EO has certainly done is buy some time, giving more control over companies that should now question their own behavior as it is now more closely monitored. Essentially, a line has been drawn in the sand by the Biden administration.
What’s in the crypto Executive Order?
The document was essentially a mandate for a variety of relevant organizations, from the US Treasury to the Securities and Exchange Commission, to spend 90 days on their due diligence, before sharing suggestions on how to most effectively achieve each of the objectives. reaches. These targets not only focus on regulatory compliance, they span a broader spectrum and show broader concerns about issues such as US leadership in this area and the inherent climate risks of crypto.
At this point, it would be speculative to predict what data will eventually be captured by crypto companies to meet regulatory requirements. However, one of the EO’s main focuses is to “promote equitable access to secure and affordable financial services”, explaining that “such secure access is especially important for communities that have long had insufficient access to financial services”.
This implies an admission that digital assets will undoubtedly affect more demographics than they currently do – those who have less experience and education around crypto, and are therefore more vulnerable to illicit activity.
This commitment to “protection” is pervasive throughout the document, whether for consumers, businesses or investors. It suggests that communication with crypto firms (and by extension those involving NFTs) will be audited to provide this layer of protection, perhaps even to the extent of highly regulated financial services.
on May 4, California Governor Gavin Newsom signed its own cryptocurrency Executive Order, which was well aligned with President Biden’s, and shared a sense of progressive ambition.
As with Biden, Newsom seems focused on creating a transparent and level regulatory playing field, which in turn will protect consumers. His EO is also more reactive than proactive, as Newsom calls on government agencies to work together and come up with their framework. This is essentially a microcosm of Biden’s nationwide approach.
“Too often, government lags behind technology advances, so we’re leading the way in this and laying the groundwork for consumers and businesses to thrive,” explains Newsom.
While this may not appear to be a sign of support for the government, such a gesture from a leading technological and economic giant like the state of California certainly confirms the direction in which it is headed. There is a general sense that it is a matter of when, not if, more states will follow the federal lead.
A quality mark
As explained, the Executive Order does not yet set a definitive direction where it is headed from a regulatory perspective. However, it has set timelines for when various proposals for agencies should be made, the latest being within 180 days of the March signing of the EO.
Now that the EO has been signed, the crypto community has reason to be optimistic. The government has shown a willingness to embrace the benefits of crypto and seek constructive feedback on how to alleviate the problems. By encouraging consistency at the federal and state level, a clear set of regulations across the board seems imminent, especially as more states follow California’s lead.
The best approach for crypto observers is to pay attention to the reports released by government agencies, when and when they occur. While it won’t happen overnight, these reports will have a major impact on establishing a consistent regulatory framework.
Judging by the longstanding reluctance to embrace crypto and the language permeating the US president’s executive order, it could well be a strict set of guidelines that has a lasting impact.
Through Harriet Christie
Harriet Christie is operations director at MirrorWeb, a data archiving solution based in Manchester.
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