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'It is time to buckle up' - what to expect from the US blockchain regulatory environment

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‘It is time to buckle up’ – what to expect from the US blockchain regulatory environment

The collapse of FTX has led to increased global interest in blockchain regulation.

Summary:

  • The collapse of FTX has led to increased global interest in blockchain regulation;
  • Blockchain regulation protects investors, increases transparency, and reduces risks;
  • Regulation ensures financial stability by addressing money laundering and illicit activities;
  • It promotes consumer protection by setting guidelines for privacy, security, and fair practices;
  • The regulatory environment in the US is challenging, with rapidly changing laws and a divided Congress;
  • Stablecoins are likely to face more federal oversight, particularly due to concerns over stability and liquidity;
  • The BSV Blockchain Association supports regulation for global adoption and engages with policymakers;
  • Regulation provides clarity, encourages compliance, fosters innovation, and attracts investment;
  • The Bitcoin Association launched the Blacklist Manager tool for compliance with court orders.

Following the high-profile collapse of the crypto-asset exchange FTX, major jurisdictions around the world are increasingly looking at regulation. Blockchain regulation is important for several reasons. It protects investors by establishing rules and standards that increase transparency and reduce risks associated with cryptocurrencies and blockchain projects.

Secondly, it ensures financial stability by addressing concerns related to money laundering, terrorist financing, and illicit activities through the implementation of anti-money laundering (AML) and know-your-customer (KYC) requirements. It also promotes consumer protection by setting guidelines for data privacy, security, dispute resolution, and fair business practices in blockchain-based applications.

These were some of the topics discussed at a fireside chat at the recent Unbounded Perspectives Summit in Austin, Texas. The chat was hosted by Zach Resnick (Founder of Unbounded Capital) and included George P Bush (Partner at Michael Best).

Time to buckle up for crypto regulation

Bush began the presentation by noting that the crypto-asset industry has created ‘overnight fortunes’ and significant investment opportunities, but that this has to be done within the confines of the law. He cautioned that institutional investors and crypto businesses should have good legal counsel in place to ensure that they follow both state and federal legislation.

Bush said that the current regulatory environment in the US is particularly tricky, as laws are seemingly being created overnight. This is further complicated by a divided Congress, ongoing hearings and regulators who sometimes flip-flop on their positions.

‘Regardless of what part of the landscape you are in – whether you are a bank, lender, investor, developer or coder – it is time to buckle up as there is going to be a lot of pain ahead when it comes to regulation,’ he said.

Stablecoins likely to see more oversight

Bush said stablecoins in particular are likely to see far more Federal oversight going forward following the controversy surrounding Tether. He added that this will likely include greater liquidity requirements, and any asset that advertises itself as pegging itself to a currency will likely upset regulators as it creates the impression among investors that it is completely stable.

He pointed to concerns where historically there has been a ‘run’ on banks as investors have rushed to get their money out all at once and there is a concern that people can’t get their money out of these stablecoins.

‘If you are going to advertise yourself as the most ‘stable’ type of crypto out there, but yet can’t redeem and potentially deceive the public in your statements and marketing, that is going to be a red flag for regulators,’ Bush said.

You can watch the full fireside chat below:

BSV Blockchain Association is pro-regulation

BSV Blockchain Association is pro-regulation and believes that the global adoption of blockchain technology requires enterprises and lawmakers to become comfortable with legal compliance by industry participants.

To ensure the development of a regulatory environment that both fosters lawful conduct and facilitates innovation, the Association regularly engages with leading policymakers to advise on the development of positive policy.

The regulation provides clarity on legal and regulatory obligations, encouraging compliance, good governance, and accountability. It also fosters innovation and market development by providing a clear legal framework, building trust, and attracting investment.

In October 2022, the Association announced the launch of its Blacklist Manager, the first software tool making it possible for Bitcoin miners to comply with court orders to freeze lost or stolen Bitcoin tokens.

Ryan Brothwell

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