This past March, the Biden Administration released its long-awaited executive order on “ensuring responsible development of digital assets,” with many in the cryptocurrency industry welcoming this move as a step toward much-needed regulatory clarity.
Each year the cryptocurrency ecosystem grows and expands, with millions of people around the world — including 16% of adult Americans — having purchased some sort of digital asset. It was in response to this that the Biden administration began to expand on their above-mentioned executive order, creating a first-of-its-kind cryptocurrency comprehensive framework to encourage regulated domestic digital asset development.
But for America to continue being the trailblazer it is for the cryptocurrency industry, the government must shift its focus to enabling innovation and economic growth here at home. While many of the findings that stem from the executive order have yet to be released, the initial takeaways underscore the U.S. government’s concerns over the risks posed by the fast-growing crypto sector, particularly to consumers and the broader financial system. The nine federal agency reports submitted to date champion the importance of law enforcement and strengthening the country’s financial and monetary systems.
Yet, after six months (and counting), the federal government’s review of the crypto world hasn’t offered a concrete roadmap for oversight.
If we take a closer look at the White House’s comprehensive framework, it seems that the governemnt is less focused on allowing responsible innovation to expand — especially when compared to their other key priorities: consumer and investor protection; promoting financial stability; countering illicit finance; U.S. leadership in the global financial system and economic competitiveness; and financial inclusion.
It’s not terribly surprising that the federal government believes most of the cryptocurrency industry isn’t complying with existing laws and regulations. What is more frustrating is that innovation is being stifled due to a lack of guidance on how companies can actually achieve this compliance.
But in the same way that ignorance of the law is not a valid excuse for breaking the law, ignorance of regulations cannot be the reason for progress to grind to a halt. Rather, cryptocurrency companies need to have constant conversations with regulators at the SEC, OCC, FTC and other government agencies. Establish point persons for your company, make connections with specific people at relevant government agencies and talk to them. Ask for their guidance, try to figure out which way they think upcoming regulations will land and start building accordingly. Having regulatory compliance ahead of time is the best way to gain a first-mover advantage in this industry. It’s easier to keep building if you don’t have to go back and start over again.
Join the community where you can transform the future. Cointelegraph Innovation Circle brings blockchain technology leaders together to connect, collaborate and publish. Apply today
The framework also seems to hint that there’s a lack of nuance in the government’s approach to the crypto industry, as well as its support of the Securities and Exchange Commission’s enforcement of existing securities law. Troublingly, that position echoes SEC Chairman Gary Gensler’s recent comments that the problem lies with crypto firms that are not in compliance with existing regulations — while failing to consider whether decades-old case law might provide adequate guidance for cutting-edge innovation.
Moreover, while not mentioned directly, Luna (LUNA), TerraUSD (UST) and the challenger bank mobile apps that promise high yields seem to be likely targets due to their enticing offerings and recent controversial press. Rather than creating test environments to help foster these new products for consumers, the administration appears stuck on creating bad actors out of misunderstood projects.
To be clear, increased investigation and enforcement are expected from the Biden Administration. I commend the focus on consumer and investor protection, as well as countering illicit finance. But policymakers’ extreme emphasis on risks, with little regard for opportunities, is abundantly clear and will only hinder the further development of digital assets.
To get ahead of this, industry leaders should be: a) self-policing of bad actors; b) eagerly offering regulatory guidance; c) staying far from the edge of what’s legal, not constantly trying to find the boundaries; and d) creating products that solve problems for everyday Americans, not simply new ways to make money.
We cannot allow the pendulum to swing so far in one direction that other key considerations are no longer of equal weight. If we are to see real progress for the sector on both a national and global scale, responsible innovation must be held to the same standard as the other five priorities. Only then will policymakers and industry stakeholders be able to come to an agreement on a clear path forward.
Jae Yang is the founder and CEO at Tacen, a company specializing in crypto compliance.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
Learn more about Cointelegraph Innovation Circle and see if you qualify to join