The United States of America has always had one of the most vibrant financial systems in the world. In fact, the US financial sector has been the driving force behind the global economic system. Moreover, it has been at the root of most of the innovations the sector has seen.
How USD became the dominant world currency
Up till a point in time, all currencies were pegged against the US Dollar. However, the collapse of the Bretton Woods systems gave way to a system of freely floating currencies. In this new system currencies began to be pegged against each other.
However, even in this post-Bretton Woods world, the USD has been able to maintain its position of dominance. Most of the foreign exchanges held by various central banks are in the form of the US Dollar. This is because the more significant proportion of international transactions is conducted through the US Dollar.
The benefit of this has been two-fold. Firstly, it has allowed the United States to have a dominant role in the international economic sphere. Secondly, it has helped the country maintain its upper hand over the international political scene. The resultant situation has helped the US to position itself as the ultimate arbitrator and the apostle of peace internationally.
How the US feels threatened by cryptocurrencies
It is in this light that we should understand how the coming of cryptocurrencies has threatened the US. In fact, for quite some time, many nations had been vocal about the creation of an alternative international currency. The idea behind the proposal was simple. The creation of a currency that would not rig the international sphere against most of the countries. As a result, cryptocurrencies were born.
Cryptocurrencies have been a matter of security concern for the US ever since. Not only the US, the entire international security community sees the unregulated cryptocurrencies as a threat. They are alleged to bring in potential instability, both in the economic and security spheres. The cry for regulations is more importantly motivated by the need for securing the investors against frauds and unstable markets.
Cryptocurrency Law in the USA
In the United States of America, cryptocurrency laws are only being prioritized to remain competitive in the fintech sector. This view has evolved mostly due to the appeal made by a bunch of crypto leaders to the Congress. In September 2018, about 50 members of the industry attended a round table with representative, Warren Davidson.
Chief Policy officer at Coinbase, Mike Lempres, stated that the whole community wants stable markets, much like the regulators. As a result, they expressed their support for the regulators, but not without condition. They will only second the regulators if they can come up with practical solutions for the crypto market.
According to a CNBC report, the crypto community in the USA has no choice but to depend on the Congress. This is because the Securities and Exchange Commission (SEC) has rejected any possibilities of a new provision for digital assets. In fact, the SEC noted in a press release that digital assets and tokens were to be treated as securities.
As a result, the organizations trading in these securities like cryptocurrency exchanges need to be registered under the SEC. The SEC has also asserted that these objects were not comparable to legal tender. Instead, they are to be treated as taxable investments.
However, this is where the complications begin. A Brookings Institute report mentions that tokens can be used for different purposes, apart from traditional security. So they can be used as currencies for a wide array of activities ranging from betting to voting. The regulators all over the world define these under conventional unidimensional categories.
Moreover, the report also brings to light a very important fact. A 70-year-old standard for determining the nature of a financial instrument, like the Howey Test, cannot adequately address the cryptocurrencies.
Recent Developments in US Crypto Regulations
Is cryptocurrency legal in USA? Well, the answer to this question is not that simple. The US Congress increasingly recognizes the potential of the crypto assets when it comes to driving economic growth today. In that vein, the House has planned to propose two bills. The first bill deals with seeking the Commodity Futures Trading Commission’s (CFTC) recommendations for a regulatory regime for crypto assets. The other deals with competitiveness.
The first is titled, The Virtual Currency Consumer Protection Act. It will deal with the price manipulation potential of cryptocurrencies and its effects on the economy. This analysis will be based on a report by the CFTC. The bill is partly in response to the New York Attorney General’s report on the risks posed by crypto assets. The said report also reflected on how digital investors are far more vulnerable than investors in the standard exchange market.
The other bill is titled Virtual Cryptocurrency Market and Regulatory Competitiveness Act. It will deal with keeping the US economy competitive in terms of gaining investments in this sector. The chilling effect which the industry leaders had warned the US legislators of is likely the motivation for this bill.
Moreover, this bill will direct the CFTC to make a comparative study of the crypto regulations around the world. After this, the CFTC will aim to propose a regulatory regime by assessing the costs and benefits. This new regime will be more efficient than the existing money transmission system. The bill further asks CFTC to clarify the currencies which it classifies as commodities.
The Crypto Regulations Expectations
With these new regulations, the likelihood of more arbitrary charges against cryptocurrencies will be reduced in the US. Moreover, this clarity in the law will lead to more confidence amongst the investors and entrepreneurs alike. It can also potentially lead to higher growth.
Unbank, peer-to-peer blockchain banking
Learn more about cryptocurrency regulations around the world.
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