Law Decoded: Sketching the boundaries of regulatory mandates, Oct. 25 – Nov. 1

Published at: Nov. 1, 2021

The Securities and Exchange Commission could be emerging victorious in the race to secure the leading role in regulating stablecoins. Additional clarity on the demarcation of regulatory mandates between the SEC, Commodity Futures Trading Commission and the Treasury Department could come from the President’s Working Group for Financial Markets’ (PWG) report that was expected by the end of October but failed to arrive before the end of last week. The mandate to regulate cryptocurrency in the United States remains dispersed across a host of actors, and a single PWG report will not remedy this once and for all. Still, having major government actors draw the lines among each other would be valuable.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Stable-value coins?

Gary Gensler’s vision of treating stablecoins as securities — as in, the SEC chair’s famous rebranding of stablecoins into stable-value coins — could come to fruition if the leaked reports regarding the agency’s takeover of the domain are supported by the text of the much-anticipated Treasury report. It can take a long time for Congress to step into the void and establish the limits of each regulator’s authority over various classes of digital assets, so frameworks drafted by executive bodies themselves can stick for a while.

FATF’s uncertain guidance

The Financial Action Task Force (FATF), an intergovernmental organization designed to help standardize member states’ Anti-Money Laundering rules, has issued a once-postponed update to its 2019 “Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.” The document clarifies some central definitions and details how the FATF surveillance rules apply to domains like stablecoins, peer-to-peer transactions, nonfungible tokens (NFTs) and decentralized finance (DeFi).

Some of the most contentious points of the previous iteration of the framework, issued in April, included the breadth of the virtual asset service providers (VASPs) definition and the scope of financial surveillance under the so-called Travel Rule. The crypto community’s assessment of the degree to which industry participants’ objections were addressed in the update ranges from “very bad” to “somewhat better.”

BTC revolution is here

Volt Equity’s “Bitcoin Revolution” exchange-traded fund, or ETF, adds to a chain of recent launches of Bitcoin (BTC)-tracking regulated instruments on major U.S. exchanges. This new offering represents an increasingly popular format of Bitcoin-linked products that deal with neither “physical” Bitcoin nor BTC futures, instead tracking an index of companies whose valuation is directly tied to the fortunes of the crypto market. While some observers are skeptical of such a model’s prospects now that BTC-futures ETFs are accessible, it will be interesting to watch how both models’ performances stack up in the following months.

Tags
Regulation
Sec
Bitcoin Regulation
Cryptocurrencies
Government
Law
Stablecoin
Central Bank
Aml
Related Posts
Law Decoded: Post-ETF policy landscape and Novi fears, Oct. 18–25
The biggest regulatory story of the week, if not the year, has been the United States Security and Exchange Commission’s lack of opposition to the launch of the first-ever Bitcoin (BTC) exchange-traded funds, which took eight long years to materialize. While the first ETFs are tracking CME-traded Bitcoin futures rather than the asset’s spot price, the crypto space is already anticipating a pure-Bitcoin ETF as a logical next step. This bar might prove to be immensely difficult to clear, however, as SEC Chair Gary Gensler seems far less convinced of the stringency of investor protections that such products offer. Below …
Regulation / Oct. 25, 2021
How the Democratic Party didn’t stop worrying and fearing crypto in 2021
As 2022 is kicking off, America nears the first anniversary of Joe Biden’s presidency. Following the tenure’s ambitious start, the last few months witnessed some serious tumult around the overall health of the United States economy, the administration’s handling of the COVID-19 pandemic, and the tense debate around Biden’s opus magnum — the $1.7 trillion Build Back Better infrastructure legislation plan. But even as the Democrats’ ability to maintain undivided power after the 2022 midterm elections can raise doubts, the party’s prevailing view of crypto has become more consolidated than ever. The incumbent president’s party will be setting the tone …
Regulation / Jan. 1, 2022
U.S. Congressman calls for ‘Broad, bipartisan consensus’ on important issues of digital asset policy
In a letter to the leadership of the United States House Financial Services Committee, ranking member Patrick McHenry took a jab at “inconsistent treatment and jurisdictional uncertainty” inherent in U.S. crypto regulation and called for the Committee to take on its critical issues. McHenry, a Republican representing North Carolina, opened by mentioning that the Committee’s Democrat Chairwoman Maxine Waters is looking to schedule additional hearings addressing matters pertinent to the digital asset industry. He further stressed the need for identifying and prioritizing the key issues and achieving a “broad, bipartisan consensus” on the matters affecting the industry that holds immense …
Regulation / Jan. 25, 2022
Crypto Bahamas: Regulations enter critical stage as gov't shows interest
The crypto community and Wall Street converged last week in Nassau, Bahamas, to discuss the future of digital assets during SALT’s Crypto Bahamas conference. The SkyBridge Alternatives Conference (SALT) was also co-hosted this year by FTX, Sam Bankman-Fried’s cryptocurrency exchange. Anthony Scaramucci, founder of the hedge fund SkyBridge Capital, kicked off Crypto Bahamas with a press conference explaining that the goal behind the event was to merge the traditional financial world with the crypto community: “Crypto Bahamas combines the crypto native FTX audience with the SkyBridge asset management firm audience. We are bringing these two worlds together to create a …
Adoption / May 3, 2022
Elusive Bitcoin ETF: Hester Peirce criticizes lack of legal clarity for crypto
The crypto sector may be maturing, but regulatory clarity around the treatment of digital assets continues to remain cumbersome. This was recently highlighted by Commissioner Hester Peirce — also known as the United States Securities and Exchange Commission’s (SEC) “crypto mom” — in remarks she made at “The Regulatory Transparency Project Conference on Regulating the New Crypto Ecosystem: Necessary Regulation or Crippling Future Innovation?” Peirce began her speech by emphasizing the importance of “regulating the new crypto ecosystem.” While this may be, Peirce also noted that the crypto industry is still in search of an actual regulator. She said: “A …
Decentralization / June 17, 2022