The House passed a bill aimed at finalizing the regulation of digital assets in the United States. If it becomes law, the industry could finally have the regulatory clarity it is seeking.
You’re reading State of Crypto, a CoinDesk newsletter that looks at the interface between cryptocurrency and government. Click here to register for future editions.
One step closer
The US House of Representatives last week passed HR 1602, the “2021 Removal of Barriers to Innovation Act,” and passed it on to the Senate, which referred it to the Senate Banking Committee. If passed and signed, the bipartisan law would mandate a working group to assess how the US is currently handling digital assets.
Why it matters
Connected: Square Adds Bitcoin Policy Lead from the U.S. Chamber of Commerce
This could be the first major crypto bill available anywhere in Congress. In addition, this has a direct impact on how the US handles digital assets. This could finally provide companies in this industry with the required regulatory clarity. The fact that the bill is supported by both parties is another sign of him. Of course, if regulators do not act until this bill is implemented, it will take some time for actual clarity to be adopted.
Break it off
The entire House of Representatives passed the Law on Removing Barriers to Innovation, introduced by Representatives Patrick McHenry (RN.C.) and Stephen Lynch (D-Mass.) In March. This makes it the first major crypto-specific law to be passed by one of the bodies of Congress.
A number of other bills have also been introduced to define how cryptocurrencies can or should be treated under US law, but few have made progress.
“It is the first bill to address the clarity of digital asset regulations and digital asset marketplaces to go around the house in a bipartisan manner,” said Amy Davine Kim, chief policy officer at the Chamber of Digital Commerce.
The story goes on
Connected: The Turkish Government Plans the Central Bank to Control Crypto Risk: Report
McHenry and Lynch representatives did not respond to requests for comment.
Under the terms of the bill, a working group would be set up with representatives from the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), financial technology companies, SEC or CFTC regulated financial firms, academic institutions, or anyone advocating digital asset viewing Companies using financial technology, investor protection groups, and companies supporting historically underserved businesses.
The group would have a year to assess the current legal and regulatory landscape for digital assets, how that landscape is affecting crypto markets, and how other countries are approaching the industry.
More importantly, the group is asked to develop recommendations on how to improve the regulatory landscape (and thereby improve markets), as well as best practices to minimize fraud and ensure investor protection.
The bill requires that the recommendations be limited to the powers of the SEC and the CFTC.
“It brings a range of stakeholders to the table, so it’s not just the SEC, it’s not just the CFTC, it’s also companies and thought leaders who actually have expertise in digital assets,” said Kim.
Creating a working group with so many stakeholders also brings sunlight into the process of drafting or updating the legal framework for digital assets, she noted.
The next step is to present the bill to the Senate. The Senate Banking, Housing, and Urban Affairs Committee, led by Senators Sherrod Brown, Ohio, and Pat Toomey, R-Penn., Is reviewing the bill.
Kim said the digital chamber has already contacted several senators to help advance the bill.
No sponsors have been named yet, according to a search of public records.
A number of other measures taken over the past week could further strengthen the idea of legal clarity in the US
The House of Representatives Financial Services Committee last week also renewed the Fintech Task Force, led by Representatives Lynch and Tom Emmer (R-Minn.), Both of whom are returning to their roles.
“I am confident that the work of this task force will continue to lay the foundation for a better understanding of these financial technologies. Today’s release of the Fintech Report is another step in fueling financial innovation and maintaining America’s competitiveness on the global stage, “Emmer said in a statement.
Paxos receives an OCC charter
What’s going on in Turkey?
Two crypto exchanges abruptly shut down shop in Turkey last week, putting hundreds of thousands of users at risk of potentially losing billions of dollars in cryptocurrencies. I asked my colleague Sandali Handagama, who was following the situation, to explain what was going on. This is what she told me:
Within a few days, not one but two crypto exchanges were investigated by the government in Turkey, where digital assets are largely unregulated.
On April 20, Thodex, one of Turkey’s largest cryptocurrency exchanges, abruptly ceased trading and operations, informing users that the company was considering partnering with new investors. At the time of closing, the exchange was trading over $ 580 million. The founder and CEO of Thodex, Faruk Fatih Özer, is said to have fled to Albania the night before the end of the exchange, according to the local police.
On April 23, the Turkish authorities closed the bank accounts of another crypto exchange, Vebitcoin, after it too closed its exchange due to financial difficulties. The following day, Reuters reported that Turkish authorities had arrested four people linked to Vebitcoin.
Thodex ‘Özer claimed in an update on the exchange’s website that everything was fine, but the Turkish police are now looking for him, engaging Interpol in the process and locking up 62 other people connected to the company. Another four people linked to Vebitcoin were also arrested.
In response to the two incidents, Governor of Turkey’s Central Bank Şahap Kavacıoğlu said on Sunday that a wide range of crypto rules would come within two weeks, but ruled out an outright ban.
“You can’t fix anything by banning crypto and we have no plans to do that,” he said.
The fact is that it is almost impossible to completely ban crypto in Turkey. It’s a billion dollar local market where people could buy and trade crypto.
But then, last month, the central bank suddenly banned the use of crypto for payments, even though it had no long-term impact on trading.
Some people in the Turkish crypto community told CoinDesk they would welcome regulation, especially if it means fraud protection, but it remains to be seen whether the in-depth regulation will be beneficial to Turkey’s dedicated crypto enthusiasts.
Changing of the guard
Gary Gensler was confirmed as chairman of the Securities and Exchange Commission for the second year running, which is good news for Gensler and his supporters. Gensler was initially confirmed to serve the remainder of Jay Clayton’s tenure, which expires this year, in early April. On April 20, the Senate voted to confirm him for a full five-year term through 2026. Regulatory clarity for crypto will be one of its priorities, said Amy Davine Kim of the Digital Chamber.
Ex-banker who hates banks sets up a DeFi company in Russia: Former KGB officer, banker and newspaper owner Alexander Lebedev is starting a decentralized financial project called InDeFi, with which customers can deposit DAI, BUSD or USDT and receive bonuses in the form of Interest and the company’s native token. The project’s whitepaper is a bit vague on how exactly this works.
South Korea Launches New Tackle Against Illegal Crypto Activities: About CoinDesk Korea Global Editor Felix Im, South Korean Government Coordination Office is planning a “special enforcement period” to combat possible illegal activities related to cryptocurrencies under a new law that came into effect. Separately, the head of the Financial Services Commission warned that all local exchanges could be closed and referred to the new regulatory process (however, if exchanges can secure a banking partnership and register before September, they may be fine).
Chinese crypto miners are facing an unstable regulatory environment: increased control of coal mines in China’s Xinjiang region and regulations for companies that use a lot of energy in Inner Mongolia could entice crypto miners, which in turn affects them Bitcoin hashrate. We previewed what the shutdown of coal-powered miners could look like earlier this month after several power plants shut down due to accidents in the (physical) coal mines.
Outside of CoinDesk:
((signal) This is what you might call a flex. Signal found a Cellebrite device that accidentally “fell off a truck” and unpacked how it works and how it could be exploited. Cory Doctorow has a good thread that breaks down exactly what Signal’s Moxie Marlinspike did.
((Vice) Greenidge, a power generation facility that burns gas to produce electricity, plans to more than double the number of bitcoin miners it operates and received an important green light to do so last week. Environmental activists are concerned that this will also lead to more pollution as the facility burns more gas to power the new miners. The next day, Square and Ark Invest released a report claiming that Bitcoin will incentivize greater use of renewable energy.
If you have any thoughts or questions about what to discuss next week, or any other feedback you’d like to share, please email me at firstname.lastname@example.org or find me on Twitter @nikhileshde.
You can also take part in the group conversation via Telegram.
Until next week!