How Trump really feels about US Regulations and Cryptocurrencies
As one of the most important cryptocurrency markets, the United States has had a big influence on the nascent digital currency sector.
A prime example of how developments in the US can influence the global crypto market is the record-breaking crypto bull run of late 2017. The rally, which propelled Bitcoin to its all-time high of around $20,000, came as a result of the launch of Bitcoin futures contracts by the two largest derivatives marketplace operators in the US. Cboe Global Markets and CME Group launched their respective offerings in December, 2017, after they had received approval from the Commodity Futures Trading Commission (CFTC) – the agency that oversees futures and option markets in the US. Prior to these launches, the watchdog had given the go-ahead to smaller derivatives platform LedgerX.
On the other hand, the so far unsuccessful bid of US firms to launch a Bitcoin exchange-traded fund (ETF) illustrates how the country’s current approach to regulation can prompt a negative market reaction. Many believe that launching a crypto-backed ETF in the US would be the catalyst for a new bull for the digital currency market. However, over the past couple of years the Securities and Exchange Commission (SEC) has rejected multiple ETF proposals from a number of companies. The rejections have usually been based on SEC’s assessment that a proposal has failed to meet “the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices”.
While the CFTC and the SEC differ, to an extent, in their stances on cryptocurrency and blockchain – with the former being more open to the fledgling technology, while the latter adopting a more cautious approach – both agencies illustrate an overarching trend in the US approach to cryptocurrency regulation. So far, US regulators have not put much effort in developing a clear framework for the industry, electing instead to provide more general guidelines and approach the sector on a case-by-case basis.
Some, like SEC commissioner Heister Peirce, have argued that this approach could be beneficial for the industry.
“We might be able to draw clearer lines once we see more blockchain projects mature. Delay in drawing clear lines may actually allow more freedom for the technology to come into its own,” Pierce said last month, as quoted by Cointelegraph. “If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the objectives of our securities laws — protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets.”
At the same time, Pierce acknowledged that the lack of clear framework, developed specifically for the needs of the sector, had hampered some crypto projects because “securities laws make them unworkable”.
The crypto regulation landscape becomes even more fractured on a state level. With no federal law having been put in place, individual states are left to interpret the regulatory guidance as they see fit.
When it comes to crypto regulation, there are several states that are currently leading the charge. One of those is Wyoming, which recently introduced a bill that aims to provide more clarity about the legal position of digital assets. The bill classifies digital asset in three categories – digital securities, digital assets and virtual currencies – the latter of which treats cryptocurrencies as money within the state. The bill provides “an opt-in framework for banks to provide custodial services for digital asset property as directed custodians”.
Ohio is another state that has made steps toward encouraging crypto adoption. Last year, Ohio became the first American state to allow businesses to pay their state taxes using digital currencies, though the state treasury does not manage cryptocurrencies themselves. Instead, crypto tax payments are conducted through a cryptocurrency platform that handles the crypto-to-fiat conversion.
Still, state officials have openly said that the move was part of an effort to establish Ohio as one of the leaders when it comes to cryptocurrency adoption in the US. More recently, the County Auditors’ Association of Ohio (CAAO) formed a working group to explore the potential benefits of blockchain in terms of real estate transactions and transfer of land titles across multiple counties.
New York, has also been at the forefront of crypto regulation on a state level, as the state’s efforts to establish a clear framework for the sector can be traced back to 2015. In August of that year, the New York State Department of Financial Services (NYDFS), finalised a framework that required cryptocurrency businesses to apply for a so-called BitLicense, in order to operate in the state. Earlier this week, NYDFS issued its 18th BitLicense since the requirement was established. The license was awarded to crypto brokerage start-up Tagomi Trading.
However, New York’s stricter regulatory regime has garnered a mostly negative reaction from businesses, with some firms choosing to leave the state, rather than applying for the licence. During a cryptocurrency conference in Manhattan last year, Erik Voorhees, the chief executive officer of crypto exchange ShapeShift, called BitLicense “an absolute failure”.
In an attempt to relax the current regime, New York State Assembly legislator Ron Kim last March proposed a bill called The New York Cryptocurrency Exchange Act, which aims to create a regulatory sandbox. Kim reportedly introduced the legislation after meeting with blockchain industry leaders on the subject.
What about Trump?
It looks like US regulators and legislators are still figuring out what their stance on digital currencies and the wider blockchain space. But what about the highest office in the land? President Trump has been very outspoken on a myriad of topics, ranging from North Korea, through global warming, to gun control and TV ratings. However, Trump has so far been rather silent on the topic of cryptocurrency. His most direct involvement with the sector probably was last year’s ban on purchases of the controversial Venezuelan digital currency Petro. Other than that, the Trump administration has indicated that it is monitoring the sector, but this is likely related to the possibility of virtual currency to be used for illegal activities, such as money laundering.