U. S. may amend the laws in cryptocurrency market in 2023

01/12/2023

6 minutes read

2023.01.12 15:26

By Tiffany Smith

Budrigannews.com – After a four-day, 15-ballot ordeal that left many wondering whether political gridlock was now the new normal in the United States and, if so, what the consequences would be, the United States House of Representatives elected a speaker last week.

For instance, were Republican Kevin McCarthy’s concessions ultimately going to make it difficult to achieve any kind of legislative consensus, making it impossible for the United States to raise its debt ceiling and fund the government later this year? This would make it impossible for the United States to do so. Not everyone was optimistic.

Representative Ritchie Torres, a Democrat from New York, stated to Budrigannews on January 6 that the House of Representatives will be largely “ungovernable” in 2023, shortly before joining colleagues for that day’s series of ballots, which culminated in a resolution at midnight. Torres made the observation that while the 118th Congress will be one of the least productive, the 117th Congress was one of the most productive legislative sessions ever.

In light of the most recent commotion in the world’s largest economy, it is worthwhile to inquire about the implications for blockchain technology and digital assets. Does this imply that Congress will not pass any significant crypto legislation in 2023?

Necessarily not. According to Torres, who serves on the House Committee for Financial Services and himself introduced crypto legislation in December as a response to the FTX collapse, “on the surface, at least,” there is a bipartisan coalition in the House to pass crypto legislation.

Before the formal swearing-in ceremony on Jan. 3, Representative Torres is seen outside his office. Source: Twitter Crypto reform has, in fact, been advocated frequently by Democrats and Republicans in both the House and Senate recently. Indeed, the analytics company Chainalysis recently highlighted around 20 bills in Congress that have the potential to affect stablecoins and cryptocurrencies. Only the House Committee on Financial Services has a crypto-friendly incoming chairman, Republican Patrick McHenry, and Democrats like Torres and Maxine Waters are also crypto-friendly.

However, Torres sees crosscurrents that, “deeper down,” could disrupt legislation: Because they oppose all regulation, the political far right may oppose any crypto initiatives out of principle. On the other hand, the far left may also want to keep digital assets unregulated in order to delegitimize and eventually kill them. This group considers crypto legislation to be equivalent to accepting the emerging industry.

Torres, on the other hand, is of the opinion that legislative action is essential. Because digital assets are too volatile to be left unregulated, he told “Congress has an obligation to intervene.” He stated that the two-year efforts made by SEC Chair Gary Gensler to bring cryptocurrencies and stablecoins under federal oversight solely through regulatory action had not been successful. The need for more long-lasting legislative solutions has become abundantly clear, particularly in light of the FTX disaster.

Torres also doesn’t think that the recent events will make the House’s scheduled FTX fraud hearings take longer or fail. He pointed out that holding hearings is easier than passing legislation for one thing.

However, Torres may be overly pessimistic in response to the larger legislative issue. The Crypto Council for Innovation, which supports the establishment of a federal regulatory framework to provide all market participants with clarity, maintains optimism. According to Brett Quick, the head of government affairs for the council, who spoke with Cointelegraph, “We are optimistic that given broad bipartisan support by lawmakers, a comprehensive bill could make it to the president’s desk this Congress.”

There will undoubtedly be difficulties. Things won’t be easy because of the Republican majority’s “razor-thin” nature and the House Freedom Caucus members’ persistent demands, which held up the speaker election process for a week. However, Quick added, “crypto may be one of the few areas where there is enough broad bipartisan support from all points on the political spectrum that moving legislation this Congress is a reasonable expectation.” This is because “crypto” is one of the few areas.

Like Torres and Quick, Chainalysis’s senior policy adviser Clark Flynt-Barr commends the bipartisan collaboration that has emerged around crypto over the past year. She mentioned the House’s Waters-McHenry stablecoin bill and the Senate’s Lummis-Gillibrand Responsible Financial Innovation Act, both of which were supported by both parties. Flynt-Barr anticipates an increase in this kind of collaboration, particularly in light of recent industry events like the FTX collapse,

“Crisis and scandals, and now fraud, frequently give reforms and regulations that might not otherwise be the most important priority more momentum.”

However, care must be taken. Legislation of any kind will not suffice. It is essential that Congress spend time learning about cryptocurrencies and blockchain technology thoroughly. Flynt-Barr warned that, in the alternative, “reactive policies that do not take into account the unique aspects of the industry could have disastrous impacts and push this innovation abroad.”

In this regard, would a moratorium on cryptocurrency and stablecoin legislation in the United States in 2023 really be so detrimental? Isn’t it true that sometimes the status quo is preferable to rash action?

Susan Friedman, head of policy at Ripple, issued the following warning: “Without regulatory clarity, the U.S. crypto industry is stuck in limbo.” Consumers are being forced to use offshore platforms that operate without U.S. oversight as a result of this regulatory limbo. She told Cointelegraph that if the United States does nothing, it could lose its competitive position in crypto innovation and development.

Abegail Cave, press secretary for U.S. Senator Cynthia Lummis, co-sponsor of the Responsible Financial Innovation Act, stated to Budrigannews, “Continued inaction is simply not an option.” When asked about the current impasse in the House, she added:

“Senator Lummis is of the opinion that this will not have any effect on the prospects for digital asset legislation in the 118th Congress.” Members of Congress from both parties have developed a strong desire for regulation of digital assets over the past year.

According to the senator, whose proposed legislation aims “to bring digital assets within the regulatory perimeter,” new laws will be required to protect consumers and permit the crypto industry to continue innovation.

However, others assert that non-legislative means of regulation can also be effective. According to Flynt-Barr, “in the absence of legislation, agencies can issue new guidance, and the administration can use its rulemaking authority to issue new rules.” She pointed out that several rules “that may impact crypto” are included in the most recent Unified Regulatory Agenda and Regulatory Plan released by the Biden administration, which details the actions administrative agencies plan to take in the near and long term.

Under the current circumstances, what would be a satisfactory outcome for crypto in the 118th Congress?

Torres insists on safeguards to guarantee the genuine safety of consumer funds deposited in cryptocurrency exchanges. For instance, one of his bills prohibits brokerages from lending, leveraging, or combining funds without a customer’s consent. The Securities and Exchange Commission (SEC) requires cryptocurrency exchanges to regularly report their reserves, including both assets and liabilities. FTX had assets of $900 million shortly before it collapsed, but it also had liabilities of $9 billion, which would have been a red flag if known. Torres believes that the FTX disaster could have been avoided, and laws are needed to prevent it from happening again.

Sam Bankman-Fried, a former FTX, was arrested in the Bahamas. Source: Reuters: “The development of legislative policies that are founded in ground truths, are data-driven rather than reactionary, and reflect the unique aspects of the industry and do not impose unworkable requirements on it” is what Flynt-Barr sees as a positive outcome.

She went on to say that the United States has long been at the forefront of financial regulation. In 2013, “when Bitcoin was worth something like $130 and Ethereum hadn’t even been created,” Flynt-Barr noted, one of the world’s first agencies to provide guidance on crypto-related Anti-Money Laundering laws was the Financial Crimes Enforcement Network, a Treasury Department bureau. I hope that the United States will keep leading the way in crypto regulation and do so in a way that encourages the industry to grow responsibly here in the United States, which will be essential to our economy and national security.

Friedman of Ripple also maintained his optimism that “common sense crypto policy will break through” in 2023, adding:

“We now have leaders on both sides of the aisle championing legislative solutions in both parts of Congress, and the conversation about cryptocurrency is much more sophisticated than it was two years ago.”