Cryptocurrency regulation is an increasingly urgent issue for the industry. As crypto assets enter the mainstream, consumers must be protected from risky firms and scams. Several bills are being introduced in the US Congress that will address these issues. These include the Responsible Financial Innovation Act, which aims to clarify how regulators oversee digital asset markets; provide a strong, tailored regulatory framework for stablecoins; and integrate digital assets into existing tax and banking law. The UK Fintech Week summit will also feature a discussion of how to regulate crypto, and introduce clear rules that will protect millions of people.
Despite the fact that crypto is not backed by any physical commodity, courts have ruled that it does constitute currency under money transmission laws. As such, many crypto businesses must comply with state money transmitter licensing requirements. And federal consumer protection and anti-money laundering laws also apply. This framework can be confusing and burdensome for business, especially as states’ rules vary widely.
The Hutchins Center has released a working paper on the need for better federal coordination of crypto oversight, and how a new self-regulatory body could be created to improve transparency, accountability, and enforcement. This approach would also avoid the need to impose new, costly rules on crypto and reduce regulatory uncertainty for companies, while addressing key policy goals such as financial inclusion and economic growth.