Reading time: ~ 2 m
Now the world is facing an acute problem – it is to decide how to properly regulate cryptocurrencies without harming its own financial systems.
The main battles take place in the United States, where politicians express their opinions in Congress, trying to tip the scales in their favor. Opinions fluctuate: some of the congressmen are seeking a complete ban on digital assets, someone sees Bitcoin only within a fully regulated environment. But some of them, nevertheless seeing the huge potential of the new technology, are trying to enlighten others who gather at the meetings.
Six heads of well-known cryptocurrency platforms spoke at the hearings, which lasted a grueling five hours, only with one goal is to demystify various aspects of their industry. And explain to the politicians what exactly they are trying to “regulate”.
For example, Brian Brooks, the former CEO of Binance.US, now represents the interests of the crypto community in Congressional meetings as an expert. Since they often try to file cryptocurrency as a security (we all remember about the litigation between the SEC and Ripple), Brooks was asked the appropriate question: “Is there a difference between them”. What the expert did not apply to give a detailed explanation:
“We generally cannot know for sure what is a security and what is not. In fact, classification is not critical and there is no point in trying to fit digital assets into existing frameworks. Now we can take a simple step – to identify the difference in risks, because seeing the R and PG ratings, the investor will already understand what is at stake and rely only on his own risk tolerance. “
Coinbase and FTX: we want to protect our customers
Coinbase CFO Alesya Zhanna Haas explained that, first of all, their platform wants to provide a reliable resource for investing and storing digital assets.
Coinbase wallets currently hold 12% of the total digital coin supply. There are more than 150 types of assets that you can trade and earn on it.
Haas cites other interesting numbers regarding the platform:
“We serve over 73 million customers worldwide, including 10,000 organizations and 185,000 application developers. It is important to note that almost 50% of our clients who make transactions have other occupations besides trading in the cryptocurrency industry. This indicates to us that digital assets have long evolved from an initial investment to something much larger. We will soon see real benefits from the sprawling ecosystem.
Haas added how Coinbase provides protection to its customers if their accounts are hacked, and also reduces the risk of fraudulent activities by introducing measures to prevent successful attacks from criminals (KYC / AML).
Hot wallets vs cold wallets
Coinbase stores just over 1% of its assets in hot wallets, while the rest of the coins are safely hidden in cold wallets. The danger is presented precisely by the first due to the fact that they are all the time on the network. Coinbase will reimburse customers in the event of a breach, but not in the event of an account hijack.
CEO of Alameda Research and FTX Cryptocurrency Exchange Sam Bankman-Freedhas long been accused of its platforms exposing their users’ data to authorities. However, large exchanges are obliged to cooperate with the police if they do not want to be banned in the country, as happened, for example, with Binance.
The reality is that the notorious regulation implies more unconditional control over the industry than an attempt to protect people who may lose money on investments.
Bankman-Fried also mentioned this in one of his interviews:
“We are constantly responding to requests from law enforcement agencies. In this regard, we are always ready to help with the terms of providing information related to FTX and our users. Perhaps it may seem unethical on our part, but we are not offered a choice, but demanded the necessary information. “
Is it all just controversy for politicians? Can the US provide an adequate regulatory framework for digital coins?
Open networks and digital currency
Stellar CEO Denelle Dixon has spent a lot of time promoting, among other things, the openness and interoperability of web technologies.
The Stellar ecosystem is a decentralized, no-access network optimized for payments. This is one of those projects that can claim to be introduced into industries that are familiar to us, for example, medicine or education.
For regulation
Charles Cascarilla heads Paxos, a digital currency movement company. This is another project on the basis of which you can build a financial system that will work for ordinary citizens, and not for the benefit of a bureaucratic society.
Cascarilla noted in a recent interview:
“We believe that the main prudential state or federal regulator should regulate digital asset companies and their products. But at the same time, regulation must ensure that clients’ assets remain safe. ”
Circle CEO Jeremy Allerhas long stated that the internet needs its own form of currency and its own form of digital money. Circle is the second largest stablecoin issuer in the world.
Circle is also committed to improving the financial system in the United States and around the world. The project wants to combine the day-to-day use of stablecoins, with the benefits of “global reach as well as near-infinite settlement” and, in particular, low transaction costs.
Meta Novi wallet threat to dollar status?
There are many rumors about the Novi wallet, as well as about the company, which recently decided to come to grips with the metauniverses.
Meta is a company that used to be called Facebook, but in addition to social networks, it also has the messenger WhatsApp and Instagram. It is led by billionaire Mark Zuckerberg. Novi is a cryptocurrency project that Meta has been involved in for several years.
The pilot phase of the project aims to provide cheap and fast transactions between Guatemala and some US states. To use the application, you will need to download money for transfer to a digital wallet, and upon making a transaction, the currency will be transformed into Pax Dollar (USDP), which is one of the stablecoin options.
A stablecoin is a digital asset whose value is tied to an external asset, in this case, the dollar.
For some reason, it was this project, among many others, that caused concern among regulators, who are worried that about three billion Meta users (we are talking about social networks owned by the company) could be included in the stablecoin project. As some opponents of the cryptocurrency point out, the USDP could jeopardize the US dollar’s status as a global reserve currency.
US regulation and Web 3.0: a starting point
Patrick McHenry attended the hearing as the representative of the Tenth District of North Carolina. He, arguing with the provisions of the US Constitution, tried to determine what role blockchain and digital assets can play in the evolution of the Internet, and moreover, has already influenced its development.
“Let’s try to figure out where the Internet was originally, where it came from, and where it is going. In the beginning, he offered us only the text – we could read, but nothing more. Then the geniuses of technical development figured out how to add a new layer to this space – these were already pictures and videos. The Internet has become much more interactive. On the other hand, it has lost its decentralization, being almost completely controlled by the authorities of different countries. Now that we hear more and more about Web 3.0. you need to correctly understand the essence of the new technology before trying to adjust it to the existing framework. “
A distinctive feature of Web 2.0 is the ability to study any content, surrounded by barbed wire around the perimeter, installed by censors of different classes. And it’s not only about state bans, but also about the “morality police”, which is always ready to run into comments and condemn an unlucky user who has forgotten that it is impossible to joke about LGBT or BLM. The innovation of Web 2.0 is precisely this ability – to create content, and not just read what a bunch of companies have to offer.
What makes Web 3.0 different is the ability to own the real network. And the cryptoassets themselves represent a fraction of ownership in the underlying network.
Risks and Benefits: The Cryptocurrency Equation
Coinbase CFO Haas highlighted the importance of balancing risks and rewards:
“We have introduced mandatory KYC on the Coinbase platform, but of course this is not all. Before getting on the platform, the asset undergoes a rigorous audit and we give an objective assessment of the project so that our users have the right impression about it. Of course, the way to the stock exchange has been ordered for fraudulent projects. ”
Bankman-Fried also pledged the high level of security provided by the FTX crypto exchange:
“We have international licenses in the USA. A license to operate a monetary services business is granted in addition to this. However, we are also CFTC licensed. We have DCO, DCM and another license from them through FTX derivatives. We look forward to continuing to work with them to create more advanced products. “
Still, US regulation does not apply everywhere. The CEO acknowledged that FTX spot trading products have not yet received their license.
US regulation and terrorism
The question that worries many who are on the other side of the barricade: “Is it possible with the help of cryptocurrency not only fraudulent activities, but also support for bloody autocratic regimes.”
Bankman-Freed examined this issue on the example of his FTX cryptocurrency exchange:
“We conduct sanctions checks on all of our users, and we can monitor them using the feature. To some extent, we monitor their actions on the platform using KYC. Moreover, we observe the blockchain and fiat assets that are transferred to and from our system. “
All major exchanges are engaged in verifying the sources from which money is transferred to their platform. Overall, the fears of scams and sponsorships are understandable, and these cases are not uncommon, especially when it comes to DeFi, the decentralized app space.
US regulation: main conclusions
This hearing seemed to reinforce the notion that cryptocurrency is no longer the Wild West in the US.
The US regulations will be toughly adjusted, but there is hope that crypto assets will find their place in the sun in the constitutions of the US and other countries.
Tom Emmer, a U.S. representative from Minnesota, stated:
“Once again I want to thank the witnesses for being here. I hope this is the first of many of these discussions that we are having as Congress tries to put together a thoughtful and understandable governance structure for the industry. ”
Posted by Newt Salamander, Analyst at Freedman Club Crypto News
#Regulatory #Review #Politicians #Crypto #Bosses
