2021-08-06 23:47:59
Why the U.S. Isn't Going to Ban Cryptocurrencies
Symphony Insights |July 30th, 2021
Crypto regulation is coming...
Over the past few months, China has banned crypto mining operations and ordered big banks not to do business with crypto companies. The Federal Financial Supervisory Authority in Germany, known as "BaFin," announced it will be regulating alternative investment funds that want to invest in digital assets like cryptocurrencies. And South Korea's Ministry of Strategy and Finance is launching tax rules and regulations for crypto transactions beginning as soon as 2022.
That's on top of the U.K. Financial Conduct Authority recently saying it will clamp down on major exchange Binance's activities in the U.K.
All of this regulation might sound like a death blow to cryptocurrencies... but it's actually a good thing.
Let me explain...
Multiple countries, including Nigeria, India, Ireland, Thailand, and the U.S., have all recently made headlines by offering their thoughts on crypto regulation.
For starters, Swedish Minister for Financial Markets Åsa Lindhagen expressed the need for cross-border coordination in regulatory efforts. These comments come as Sweden continues the development of its own central bank digital currency ("CBDC") called e-krona.
The European Union has set 2024 as its goal for a "comprehensive framework enabling the uptake of distributed ledger technology ("DLT") and crypto-assets in the financial sector."
India's central bank also released a statement walking back warnings from local private banks that cautioned their users against the purchase and use of cryptocurrencies. These cautionary messages cited an outdated three-year-old ban regarding crypto trading, which India's Supreme Court overturned in March 2020.
These actions come amidst rumors of a blanket ban by the Indian government, which may or may not have any real weight behind it.
And Nigeria recently reversed its previous bitcoin ban, which most of the country seemed to turn a blind eye to anyway. Around 32% of Nigerians reportedly use crypto, compared to 6% of Americans. Many thought a reversal of Nigeria's ban was inevitable.
Meanwhile, financial regulators in the U.S. are raising concerns over the volatility of cryptocurrencies and the increasing need for a clear regulatory framework.
That's why the U.S. House Committee on Financial Services has created a digital assets working group. This group plans to look into how to approach digital assets, digital currencies, blockchains, and cryptocurrencies in the U.S.
You see, one of the problems we've had in the U.S. is whether cryptocurrencies can be labeled as property, assets, or currencies. This affects taxable income and capital gains.
Now, I don't expect this group to come up with any definitive answers on how to regulate cryptocurrencies. But I do think it's creating a learning path. I imagine the group is bringing in all kinds of intelligent advisers... and they're going to have a conversation where someone says, "So you're telling me no one's in charge? Then doesn't that mean we have an opportunity to be in charge and sort out some of these rules?"
I've said this before... the U.S. can't regulate cryptocurrencies. The U.S. can only regulate Americans. So the next step would be for someone to say, "You can't regulate and control purely decentralized cryptocurrencies like bitcoin."
The U.S. Securities and Exchange Commission ("SEC") has already said it doesn't consider bitcoin a security because it's decentralized. There isn't a controlling body issuing new stock... so the SEC doesn't concern itself with bitcoin. But there are other coins and tokens that we can expect to be treated very differently if they do appear to have characteristics of securities.
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