Blockchain companies have begun to actively recruit former politicians and employees of financial regulators. What is the reason for this and how will it affect the prospects of the entire industry.
The whole world follows the policy of American regulators, which often sets the vector for further movements in the crypto market. On the night of April 22-23, when the market went down, one of the reasons was the plans of US President Joe Biden to increase taxation for persons with annual income over $ 1 million from 23.8% to 43.4%, that is, almost twice.
In recent months, there have been many favorable regulatory developments for the crypto industry in the United States. For example, in January 2021, the Fed allowed American banks to issue stablecoins. A positive signal was the conclusion of a pre-trial agreement between Bitfinex and the issuer of stablecoin USDT Tether Limited, on the one hand, and the New York State Attorney. Despite negative expectations of the outcome of this process for Tether, the prosecutor’s office limited itself to a small fine for the company of $ 18.5 million.
On April 14, trading in shares of the Coinbase exchange began on Nasdaq, during which the company’s capitalization reached $ 100 billion. It also became known about the intention of another large American crypto exchange Kraken to conduct a direct listing of shares in 2022, which aroused great interest among investors. The Rothschild Investment Fund RIT Capital Partners (formerly Rothschild Investment Trust) has acquired a stake in Kraken.
Nevertheless, some uncertainty about the regulation of cryptocurrencies in the US continues to worry investors. A negative signal came from the White House’s announcement that it would ban sanctions bypassing, including the use of digital currencies, and the Treasury Department’s Foreign Assets Authority blacklisted 28 crypto addresses that it considers related to interference in the American elections. In addition, the head of the US Internal Revenue Service (IRS) Charles Rettig called cryptocurrencies one of the main ways to avoid taxes on a par with offshore.
How the market is regulated in the USA?
If we talk about the legal aspects of regulation, there is still a lot of uncertainty in the United States. Several departments are involved in the regulation of the crypto industry in the United States: the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Office of Banking Supervision (OCC), the Federal Reserve System, as well as other government institutions – the prosecutor’s office, court, legislative bodies and commissions at the local level.
The Wall Street Journal drew attention to this issue and published an article criticizing the SEC’s position in the Ripple Labs case. The WSJ refers to the position of Judge Netburg, who, during the consideration of the Ripple case, noted that the SEC still does not have a clear position on which cryptocurrencies are classified by the regulator as securities and which are not.
At the end of 2020, the Securities and Exchange Commission (SEC) accused Ripple of illegally selling unregistered securities under the guise of tokens worth $ 1.3 billion. The CEO of Japanese financial giant SBI Group (Ripple’s partner) Yoshitaka Kitao said that Ripple would go public. in case of victory in the lawsuit.
How companies protect themselves from regulators?
In order to protect the interests of crypto investors, the Coinbase exchange, together with the investment companies Fidelity Investments, Paradigm and the financial provider Square, created their informal association “Crypto Council for Innovation”. In addition, many companies are trying to protect themselves from potential problems with the authorities by hiring former representatives of financial regulators.
For example, in March, former US Senator from Montana and member of the US Democratic Party Max Baucus was appointed advisor to the Binance crypto exchange . He is engaged in forging links of the trading floor with US financial regulators. He also advises the company on interaction with the authorities of the “most important” jurisdictions.
The very next day after the announcement of Bocus’s appointment, it became known that the CFTC was conducting an investigation into Binance. The Commission checks whether the crypto exchange allowed US residents to trade derivatives without having the appropriate license.
The company later announced the appointment of the former head of the Office of the Comptroller of the Currency (OCC) in the Trump administration, Brian Brooks, as the head of the American division of Binance US. It was under him that the OCC allowed banks to store cryptographic keys and backups for stablecoins.
Another landmark move was the appointment of the former head of the Commodity and Commodities Futures Commission (CFTC) Christopher Giancarlo to the board of directors of the BlockFi blockchain platform. The company provides its clients with a wide range of cryptocurrency services, including lending against cryptocurrency collateral, making deposits, buying and selling.
What will happen next?
According to Fox News journalist Charles Gasparino, the Joe Biden administration will soon decide on its approach to cryptocurrency regulation. On this score, consultations are already underway between Finance Minister Jannette Yellen and the new SEC head Harry Gensler. According to Gasparino, a ban on cryptocurrencies in the US is unlikely, but large investors are alarmed.
Coindesk analysts are confident that such initiatives will not receive support, since now such people as Max Baucus, Brian Brooks and Christopher Giancarlo are on the side of cryptocurrency . On the other hand, it is possible to increase tax pressure and control over the circulation of cryptocurrency to combat money laundering.
