Faced with the prospect of widespread crackdown by federal authorities, cryptocurrency companies are increasingly trying to argue in Washington that the old rules should not apply. To shape the debate, they are publishing their own policy proposals that would protect them from multiple regulators and even temporarily exempt them from some regulations.
The cryptocurrency sector has recently released a flood of documents outlining the general regulatory principles that they believe Congress and the Administration should adopt. Cryptocurrency firms, investors, and associations, including venture capital firm Andreessen Horowitz, pro-cryptocurrency think tank Coin Center, and trade groups, including the Blockchain Association, have stepped in, and market giants like Coinbase Inc. do it soon too.
Ideas have ranged from writing specific rules for cryptocurrencies to setting standards through a self-regulatory body, to creating a so-called safe harbor for new cryptocurrency projects that would allow them to launch and grow for a few years. before potentially registering with the Securities and Exchange Commission, a long and expensive process. A common opinion of the industry is dissatisfaction with the application of existing rules around the regulation of securities and banking to cryptocurrency companies, as well as a lack of clarity on when those rules apply.
So far, “it has played a reactionary role,” said Michelle Bond, who heads the Digital Asset Markets Association, an autonomous association. “That has to change.”
The onslaught comes as the White House considers launching a broad initiative to review and coordinate crypto policy across the President’s Administration. Joe Biden. Bloomberg News reported on Friday that the Administration is considering an executive order to instruct agencies to study various aspects of crypto policy and has discussed the possibility of appointing a cryptocurrency “czar.”
Coinbase, the largest cryptocurrency exchange based in the United States, is ready to launch its own document. At a House Financial Services Committee hearing with SEC Chairman Gary Gensler, Connecticut Democrat Jim Himes said last week that the company had proposed creating a new cryptocurrency-focused regulator, an idea that Gensler said it wasn’t necessary. A Coinbase spokesperson declined to comment.
Coinbase and other cryptocurrency companies have expressed their annoyance at the application by the SEC of decades-old securities rules to the cryptocurrency industry, and the company recently abandoned a plan to offer interest-bearing accounts after it said the agency threatened to sue.
Some cryptocurrency associations believe that the White House initiative, if it goes ahead, will give companies an opportunity to help shape new regulations for the industry. Over the past year, much of the industry’s interaction with Washington has responded to a series of fires, such as the last-minute addition of a tax reporting requirement for cryptocurrency companies in the infrastructure bill. Earlier this year, the sector successfully tackled unexpected Treasury regulations on anti-money laundering reporting.
Groups such as Andreessen Horowitz have proposed the creation or study of the creation of a so-called self-regulatory organization that would be under the auspices of federal agencies, but that would oversee some regulations for cryptocurrency companies themselves, in a similar way to other organizations of this type that exist for other companies of Wall Street. Andreessen Horowitz executives plan to meet with lawmakers and administration officials this week to discuss their proposals, the company said.
The organizations have also said they need clarity on how cryptocurrencies should be taxed and guidance on the rules that stock brokers must follow if they want to hold cryptocurrencies for clients. Some groups say that crypto companies, which often have to seek separate licenses to do business in each state, need a national licensing regime.
“We are starting to see a much more active political mindset within the crypto community,” said Kristin Smith, who heads the Blockchain Association, noting that many crypto companies in recent months opened their first offices in Washington and hired lobbyists for first time. “The industry is doing all the kinds of things we need to have the expertise and the people in place.”
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