Resolution: The Necessity of Federal Legislation in the Cryptocurrency Market (Part 1)
With the rapid development of the cryptocurrency industry, many of its risks have been exposed. Blockchain technology enables cryptocurrency to function in a decentralized pattern, which has created conservation issues and regulatory difficulties over cryptocurrency’s legal and economic status, leading to socioeconomic instability. Misconceptions are that decentralized crypto transactions leave little space for any centralized institutions to intervene; however, it is highly practical to gradually resolve these problems as the US government emphasizes accurately legislating the legal and economic positions and regulations of cryptocurrency domestically.
US Securities and Exchange Commission (SEC) Chairperson Gary Gensler once described the emerging cryptocurrency market as the “wild west” — full of scams but lacking law enforcement (Newbery). Active government legislation shall become the legal mainstay in converting the “wild west” into the American economic frontier. The US government can legislate for cryptocurrency to be identified as a financial asset and enact policies to construct the regulatory framework that would allow for taxation, pursue criminal investigations over trading and transactions, and promote conservation and innovation. To address these affairs, the proposed legislation will protect the rights and properties of cryptocurrency investors and benefit the national economy by preventing illicit activities and allowing future regulations to evolve.
The Impracticability of Comprehensive Global Regulations
The International Monetary Fund (IMF) considers the $2.5 trillion market of cryptocurrency as a “stretched valuation” that needs immediate attention from governments to form an international standard on managing market conducts and risks (Adrian). Establishing a global-unified cryptocurrency regulatory framework would efficiently promote the sharing of crypto transactional information and combat international crimes funded by cryptocurrency, but such a framework is extremely difficult to implement since legal definitions of cryptocurrency in different jurisdictions vary. For instance, China has outlawed business activities related to cryptocurrency since September 2021. According to Marco Quiroz-Gutierrez’s report for Fortune, the public notice issued by the People’s Bank of China claims that the rise of cryptocurrency trading activities has disrupted the economic order and bred criminal activities such as gambling, fraud, and money laundering. The notice also lists Bitcoin, Ethereum, and Tether and indicates that they must no longer be circulated in the Chinese market (Quiroz-Gutierrez).
On the other hand, the United States is generally permissive to the cryptocurrency market. The use of cryptocurrency is permitted as the US Treasury categorized Bitcoin as a “convertible decentralized virtual currency” in 2013 (“Statement of Jennifer Shasky Calvery”). This vast difference between the legal structure of cryptocurrency in China and the US, the two largest economic entities, demonstrates that it is very challenging for all nations to reach a consensus on the issues surrounding cryptocurrency and therefore form a global-unified regulation framework, despite the fact that cooperative international organizations such as the UN, G7, and G20 exist. These challenges further prove that the most effective and realistic way to contain the malignant expansion of the cryptocurrency industry and maintain the benefits would require enforcement to be limited to a federal level. Thus, further US government legislation is exclusively necessary to diminish the potential threats from cryptocurrency and create better economic environments for investors and society.
Adrian, Tobias, et al. “Global Crypto Regulation Should Be Comprehensive, Consistent, and Coordinated.” IMF Blog, 21 Dec. 2021, blogs.imf.org/2021/12/09/global-crypto-regulation-should-be-comprehensive-consistent-and-coordinated/.
“Different Approaches to Cryptocurrency Regulation.” AvaTrade, 26 Aug. 2021, www.avatrade.com/blog/cryptocurrencies/cryptocurrency-regulation.
Gibbs, Erik. “US-China Trade War Could Drive Crypto Adoption.” CoinGeek, 9 Sept. 2019, coingeek.com/us-china-trade-war-could-drive-crypto-adoption/.
Newbery, Emma. “SEC Chair Gary Gensler Calls Crypto ‘Wild West’ and Promises Tighter Controls.” The Motley Fool, 4 Aug. 2021, www.fool.com/the-ascent/cryptocurrency/articles/sec-chair-gary-gensler-calls-crypto-wild-west-and-promises-tighter-controls/.
Quiroz-Gutierrez, Marco. “Crypto Is Fully Banned in China and 8 Other Countries.” Fortune, 5 Jan. 2022, fortune.com/2022/01/04/crypto-banned-china-other-countries/.
“Statement of Jennifer Shasky Calvery, Director, Financial Crimes Enforcement Network, United States Department of the Treasury.” U.S. Treasury Financial Crimes Enforcement Network, 19 Nov. 2013, www.fincen.gov/news/testimony/statement-jennifer-shasky-calvery-director-financial-crimes-enforcement-network.