how the biden administration is approaching crypto regulations
A Shift in Cryptocurrency Regulation Under the Biden Administration
The regulatory landscape following the tenure of former Treasury Secretary Steven Mnuchin presented significant challenges. His proposals, described as draconian by industry veterans like Matt Corallo of Square Crypto and Jerry Brito of Coin Center, are now under review.
Whether incoming Treasury Secretary Janet Yellen will endorse these proposed know-your-customer standards or opt for a different path remains to be seen.
Optimism and Caution in the Cryptocurrency Community
The cryptocurrency community is exhibiting a cautiously optimistic outlook regarding the Biden administration’s approach to digital assets. The perceived chaos of the previous administration has fueled this sentiment.
Jerry Brito noted a contrast between Mnuchin’s alarmist views on cryptocurrency’s illicit use and the perspectives of law enforcement and intelligence agencies. He believes Yellen’s stance appears more measured and conventional.
Yellen acknowledges both the beneficial and detrimental applications of cryptocurrency. She has indicated a commitment to bolstering regulations aimed at preventing illicit activities, such as terror financing.
Key Appointments and Potential Regulatory Shifts
Yellen’s leadership is expected to influence government bodies including the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).
The SEC, OCC, and CFTC are actively recruiting individuals with substantial cryptocurrency expertise. This suggests a growing recognition of the sector’s importance to the broader economy and financial system.
Michael Barr, a former Ripple advisor and Treasury official, is anticipated to be nominated to lead the OCC. Commissioner Hester Pierce, known for her pro-crypto stance, will continue to shape SEC policy in the short term.
However, Gary Gensler, a former CFTC chairman, is reportedly under consideration to head the SEC. He has previously expressed the opinion that projects like Facebook’s Libra and Ripple’s XRP should be classified as securities and subject to SEC regulation.
Increased Clarity and Enforcement Actions
Hailey Lennon, an attorney specializing in cryptocurrency law at Anderson Kill, anticipates that Gensler’s leadership could lead to greater regulatory clarity. This clarity, she believes, will reduce enforcement actions and provide companies with a clearer understanding of compliance requirements.
The White House is also expected to nominate Georgetown University professor Chris Brummer to lead the CFTC. Brummer was previously nominated by President Obama but faced Senate confirmation delays.
The selection of individuals for key roles related to curbing terror financing, such as the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), remains uncertain.
Focus on Sanctions and Anti-Money Laundering
Lennon predicts increased regulatory scrutiny from FinCEN and OFAC, citing recent settlements with cryptocurrency companies and the addition of wallet addresses to sanctions lists. This will likely complement any positive developments from the OCC, SEC, and CFTC.
Sanctions are a central issue in 2021. The Iranian government has indicated its intention to utilize cryptocurrency, including bitcoin, to bypass international banking sanctions.
The Biden administration has not signaled any intention to lift these sanctions. In fact, the Treasury Department recently penalized BitPay for facilitating transactions with citizens in sanctioned jurisdictions like Iran, Cuba, and Ukraine.
The administration’s approach to cryptocurrency, which is also used by Iranian-Americans, will likely reflect its broader diplomatic strategy in the Middle East.
Advocacy for American Leadership in the Crypto Space
Perianne Boring, founder of the Chamber of Digital Commerce, notes that the new administration and its leadership are taking a critical view of the cryptocurrency space. She emphasizes the importance of continued engagement between industry leaders and lawmakers.
Boring argues that fostering America’s leadership role in global crypto markets is crucial, as other nations are actively seeking to attract crypto businesses and crypto mining industries.
She believes that cultivating innovation in this sector is essential to defending the dominance of the American dollar, particularly given that many stablecoins are denominated in US dollars.
Prioritizing Economic Growth and Regulatory Clarity
Boring stresses the need for the Biden-Harris administration and Congress to prioritize digital asset and blockchain policies. She advocates for policies that support economic growth and full employment.
Brito anticipates that appointments to OFAC and FinCEN will be particularly important, as these individuals will play a key role in shaping Yellen’s approach to sanctions and regulations. He agrees that new legal norms are on the horizon.
Importantly, the Biden administration has avoided publicly criticizing bitcoin, unlike the previous administration. This represents a potentially positive shift in tone.
“It’s still that period where everyone is getting their sea legs and trying to understand what their priorities are,” Brito said. “Once they start either putting forth policy or reacting to the things that happen, that’s when we’ll really know where they stand.”
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