The story of crypto is one of a global asset and technology class, and it’s one we intend to cover as comprehensively as possible. Here’s what CoinDesk’s new regulatory team is watching for next year.
Meet the team
Hey folks. Happy holidays and congratulations on getting through 2020-lite! Next year promises to be fairly significant in terms of how the regulatory environment around digital assets will develop. To that end, CoinDesk’s brand new regulatory team is up and running and looking forward. I asked the team to share what they’re expecting.
Why it matters
CoinDesk is ramping up its efforts to cover the regulatory world’s intersection with the digital asset sector. To that end, we now have a global team composed of existing and new reporters dedicated to this very specific industry. Here’s what we’ll be watching for next year.
Breaking it down
Nikhilesh De (U.S.): The big issues I’m looking at in the U.S. are stablecoin regulation and the infrastructure bill. The stablecoin issue is most interesting to me – administration officials have said on multiple occasions that they want Congress to act on the President’s Working Group report. While the report suggests that the Financial Stability Oversight Council could draft regulations, even this interagency group is asking Congress to set the rules for stablecoin oversight in the U.S. The questions are whether Congress will act and if it does, what it rules will look like.
The infrastructure bill’s impact is likewise going to draw my attention, less for the tax provision itself and more as a symbol for when the industry started really getting politically engaged. We’ve had lobbyists and policy groups for years now, but this past August’s fight over a provision defining a “broker” really felt like a shift in terms of how the industry views Washington. We’re already seeing a greater number of congressional candidates who have ties to the crypto industry. I imagine we’ll soon start hearing more about political action committees (PACs) or other efforts to lobby candidates and bolster pro-crypto politicians.
What I’m very curious about is where things land up on the actual regulatory side. Will the Securities and Exchange Commission or Commodity Futures Trading Commission take oversight of crypto spot markets? Will one of these agencies issue guidance for startups trying to launch in the U.S.? Or will 2022 be a repeat of 2021 and 2020 and 2019 and so on where we hear speeches and see enforcement actions but not much more.
On a personal note, thanks for sticking through the first year of this newsletter. More to come!
Sandali Handagama (EU): In 2022, we’re going to hear a lot more about the European Union’s (EU) proposed framework for regulating crypto assets as the European Council and Parliament start negotiating the rules. The Markets in Crypto Assets (MiCA) framework is broadly aimed at regulating virtual asset service providers and issuers. But there is an undeniable focus on policing the stablecoin sector, particularly stablecoins that resemble Facebook’s (now Meta)’s proposed stablecoin libra (now diem).
EU regulators also proposed a regulatory sandbox for projects based on distributed ledger technology (DLT) in 2020 that’s now awaiting parliamentary approval.
Meanwhile, the European Central Bank (ECB) is examining a digital euro for retail use. A number of European countries including Switzerland and France have also been part of experiments involving a wholesale digital euro as the Bank of International Settlements (BIS) continues to expand its work on central bank digital currencies around the world.
Cheyenne Ligon (U.S.): Virgil Griffith – the Ethereum developer who was charged with violating U.S. sanctions law after giving a talk on cryptocurrencies in North Korea – will be sentenced by a New York judge on Feb. 2. Griffith’s plea deal could see him serving between five and six and a half years in federal prison.
Griffith’s case is just one of many such court cases I expect to see play out next year. While the majority of them won’t be as high profile as Griffith’s, the explosive growth in the crypto industry means lawmakers and enforcement agencies are paying more attention to crypto crime.
In 2022, I expect to see an uptick in the number of criminal probes of crypto companies, charges brought against individual crypto scammers and enforcement actions and civil penalties from the SEC and CFTC as those agencies regulate crypto through enforcement.
Lavender Au (APAC): With South Korea’s presidential election in March, we are unlikely to see much regulatory action soon. But a new administration taking power could mean that the industry may finally see a promotion bill and investors may see the controversial crypto tax bill amended.
Japan launched a decentralized finance (DeFi) study group this year and we may see its findings next year. The country will also introduce legislation on stablecoins and wallet providers that engage in stablecoin transactions.
In China, the overall attitude toward cryptocurrency is now set, and it’s not friendly. Some entrepreneurs will leave the country and those who choose to remain will keep a low profile. Next year, we’ll see more enforcement, as local governments draw up more detailed regulation on crypto in their jurisdictions.
In Hong Kong, we may see the Securities and Futures Commission release specific legislation aimed at cryptocurrency late next year, insiders say.
Amitoj Singh (India): In the new year, CoinDesk will be closely watching the uncertain state of India’s cryptoverse, especially a crypto bill that hasn’t been introduced yet in parliament. CoinDesk will be monitoring how the bill evolves as lawmakers in India try to make it align with a global regulatory framework.
CoinDesk India will look at what risks the government sees in crypto and how it will try to mitigate those risks. Another issue is how crypto regulations will fit in with regulations of existing capital markets.
Other issues to look at next year include how crypto transactions will be taxed and how advertising in the crypto industry will be regulated.
Changing of the guard
No more votes this year, happy holidays!
- Do Kwon, Terra Claim SEC Violated Procedure in Ongoing Legal Fight: Ligon takes a look at the burgeoning legal fight between the SEC and Terraform Labs. Missed the filings? Catch up here.
- Another Ethereum Education Initiative Hampered by Iran Sanctions Fears: Gitcoin discontinued a crowdfunding campaign aimed at helping Farsi-speaking students learn how to code on Ethereum, citing concerns of violating U.S. sanctions law. Anna Baydakova looks at how broadly that shutdown hit.
- Coinbase CEO Brian Armstrong Is Sued for Allegedly Stealing Blockchain Startup’s Work: MouseBelt, a blockchain investor, is suing Coinbase CEO Brian Armstrong and various Coinbase entities on allegations that the defendants conspired to steal intellectual property and other work that MouseBelt supported as Armstrong spun up ResearchHub, a platform intended to distribute scientific papers with a token-based system.
- (The Washington Post) The Post looks at Wyoming and how the state has become a tax haven for oligarchs and other individuals.
- (The New York Times) Executives and developers are leaving major technology companies like Google and Apple to join crypto startups.
- (U.S. DOJ) The U.S. Department of Justice announced last week that it seized 3,879 bitcoins that a defendant allegedly seems to have used in an effort to hide funds embezzled from his company. What’s interesting to me is that the DOJ seems to be saying that law enforcement officials were able to recover bitcoin stored in a cold wallet. The actual complaint and supporting documents aren’t in the federal PACER system yet, so I haven’t been able to read through them, but I would love to know more about this case – specifically, did the defendant just hand over the private key? Or is there more to this?
You can also join the group conversation on Telegram.
See ya’ll next week!