Crypto regulators lag behind the blockchain industry

On September 1, Gary Gensler appeared before the European Parliament, sharing his policies as if he didn’t have enough to do Suggest Regarding matters such as the supervision of encrypted assets. Although the chairman of the US Securities and Exchange Commission made it clear that he was expressing his views-not the views of the committee-his (virtual) appearance would inevitably cause problems.

Does Gensler, regarded by some as the most proficient cryptocurrency regulator in the United States, believe that cryptocurrency and blockchain policies must be coordinated globally? If so, can he work with Europeans — or the United States and the European Union have different priorities? More generally, are globally uniform regulations feasible, especially in areas such as decentralized finance?

When the New York Times referred to cryptocurrencies as Main story In the version on Sunday, September 5, it was observed that “the boom in companies that provide cryptocurrency loans and high-yield deposit accounts is disrupting the banking industry, allowing regulators to scramble to catch up.”

All this begs a question: So the regulator?

“I think that in the context of the recent surge in cryptocurrencies, it is very persuasive to have the chairman of the SEC serve in the European Parliament,” Pablo Agnese, a lecturer in the Department of Economics and Business Organization at the International University of Barcelona, ​​told Cointelegraph, adding, “They are not only [i.e., regulators] While playing the catch-up game, they are also trying to reach a political consensus, at least in the relationship between the United States and Europe. “

Patrick Hansen, until recently the head of blockchain at Bitkom (a German association of digital economy companies) believed that Gensler is undoubtedly aware of the degree of decentralization and globalization of the crypto community. He told Cointelegraph, “DeFi projects mainly come from the United States and Europe. He may want to ensure that the two regions are aligned on these issues to prevent regulatory arbitrage.”

Growing awareness

“I don’t believe that the recent high-profile meetings between US regulators and their European counterparts represent a policy shift,” Jeffrey Goodell, a research assistant at University College London and deputy executive director of the Blockchain Technology Center at University College London, told Cointelegraph. He added :

“Both sides of the Atlantic are increasingly aware that digital currencies will continue to exist and may bring systemic risks, not only for investors looking for new sources of irrelevant returns, but also for monetary sovereignty.”

Gensler pointed out in a speech to the Economic and Monetary Affairs Committee of the European Parliament, “This $2.1 trillion asset class is truly global. It has no boundaries or boundaries. It runs 24 hours a day, 7 days a week.”

While affirming that he is “technology neutral”, Gensler emphasized that “I am by no means public policy neutral.” He said that sound public policies need to protect consumers, reduce illegal activities, and ensure financial stability, adding: “For those who want to encourage cryptocurrency innovation, I want to point out that throughout history, financial innovation will not last long. Booming externally. Public policy framework.”

The United States and Europe: Different concerns?

Nevertheless, the coordination of encryption supervision still needs to reach some consensus around the goal. Are the priorities of European policymakers different from those of Americans? For example, Europeans may be more worried about the environmental hazards caused by Bitcoin (Bitcoin) Mining, and US policymakers may be more concerned about whether stablecoins are truly stable.

Hansen pointed out: “Environmental damage is definitely a bigger concern for the EU, especially the European Parliament.” Some political groups such as the Green Party hope to ban the proof-of-work consensus agreement. He added that as for stablecoins, most of them are denominated in U.S. dollars, so this can be understood as a top priority for the United States, but if all decentralized finance (DeFi) activities are denominated in U.S. dollars, they may become a concern of the European Union.

Agnese believes that environmental issues are a bit far-fetched—perhaps even a way for critics to discredit the technology—he cites a May 2021 Galaxy Digital report that claims that the Bitcoin network uses Less than half the energy He told Cointelegraph that, being employed by the banking system and the gold industry, “if we regard cryptocurrency as a potential medium of exchange, these are arguably the two closest competitors”.

However, of course, policymakers in the United States and Europe share common interests in encryption, such as ensuring universal compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. “The most important short-term commonality must be the regulatory standards of centralized cryptocurrency custodians, exchanges, brokers, etc. in KYC, AML, taxation and consumer protection,” Hansen said.

In Agnese’s view, stablecoins are also an effective area of ​​general concern, “because many of these cryptocurrencies linked to major currencies such as the U.S. dollar have not been audited, or even after audits, many questions remain unanswered.”

In his speech on September 1st, Gensler pointed out that in July, “nearly three-quarters of transactions on all crypto trading platforms occurred between stablecoins and some other tokens.” He suggested that stablecoins can be a useful tool for those seeking to circumvent financial regulation. People provide conveniences, including anti-money laundering and sanctions rules. “European regulators are of course aware of the counterparty risks inherent in stablecoins,” Goodall pointed out, adding:

“When private-sector stablecoin issuers fail to deliver on their pledge to maintain the pegged exchange rate, will the European Central Bank bail out stablecoin holders? If the answer is definitely yes, then issuers can effectively create digital currencies on behalf of the central bank. Complete the work of the central bank. If the answer may be no, then stablecoins are not so stable and should be traded at discounted prices.”

However, Goodall refuted the view that US regulators are bound to be late for crypto assets. “I think the whole story is more subtle,” he told Cointelegraph, explaining that the largest digital asset exchanges settle their transactions in U.S. dollars, and the largest stablecoins are also pegged to U.S. dollars. “So it can be said that cryptocurrency pairs are similar to other countries. In comparison, the monetary sovereignty of the United States is not that serious.”

In addition, many large U.S. financial institutions have stakes in the crypto space—that is, “stakeholders in the infrastructure and services that underpin digital assets—regulators may be more willing to be patient rather than breaking the delicate balance,” he added .

Does it really need to be unified?

Finally, is a globally unified encryption regulatory structure necessary? Agnese urged a non-interfering approach to crypto regulation-allowing the technology to develop and showing what it can do-adding:

“Money laundering, the environment, and the lack of serious audit work are not unique to the blockchain ecosystem. It is a pity to see the overreaction of major governments stifle innovation and hinder the development of the sector, thus depriving the entire society of all upcoming benefit.”

But power may not be so patient. As the New York Times reported, “Senior officials of the Federal Reserve and other banking regulators have urgently begun what they call the ‘Crypto Sprint‘Trying to catch up with rapid changes and find out how to contain the potential dangers of emerging industries. The short history of the industry is accompanied by high-risk speculation and technological advancement. ”

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As far as Goodall is concerned, he is skeptical of a global encryption regulatory system without central bank digital currencies. He said: “If it is not impossible, it will be difficult to regulate digital assets globally,” but by taking the correct approach to government-issued digital currencies, “we can mitigate the systemic risks associated with digital assets and may avoid global Consensus requirements.”

At the same time, Hansen told Cointelegraph, “Ignoring the $2 trillion or more market that has existed for more than a decade is no longer an option. The regulatory framework for centralized crypto companies-exchanges, lenders, etc.-is about to be introduced. “Although actions on DeFi and other issues are “much more complicated and require more discussion and time.”