Opinions

CFTC Chair on Crypto Regulation: We Don’t Want to Snuff out Innovation: The chairman of the United States Commodity Futures Trading Commission (CFTC) has called for “principles-based regulation” for cryptocurrencies.

Heath Tarbert, who assumed his post following former Chairman J. Christopher Giancarlo in July 2019, stated that taking such an approach in regulating digital assets would allow a period of development and observation before it may be appropriate to adopt more targeted rules. Tarbert delivered his remarks on crypto regulation in an op-ed published on the CFTC website Nov. 19.

In the statement, Tarbert emphasized that the term “principles-based regulation” does not imply a light-touch approach or deregulation, stating that it is actually “far from it.” The chairman elaborated that such an approach involves moving away from detailed rules to relying more on high-level and “broadly-stated principles” to define standards for regulated firms and products.

US Deputy Treasury Secretary: Crypto Raises Questions on Self-Government: The United States Deputy Treasury Secretary argued that decentralized privately-issued digital currencies can shift some functions from the state to the private sector.

Deputy Secretary of the Treasury Justin Muzinich presented his view on the emerging ecosystem of financial intermediation and digital currencies at an annual banking and payments conference in New York on Nov. 21. The keynote by Muzinich was published on the official website of the United States Department of the Treasury.

Speaking at the conference, Muzinich addressed issues associated with digital currencies alongside regulatory and tax reform and the intersection of economic policy and national security. In his statement, Muzinich continued a common Treasury narrative on concerns that cryptocurrencies can be used for illicit practices such as money laundering. The Deputy Secretary emphasized that these concerns remain one of the top issues concerning the authority:

“One of the issues at the top of Treasury’s mind is that digital currencies can potentially be used to evade existing legal frameworks — like those governing taxation, anti-money laundering, and countering the financing of terrorism.”

Joe Lubin: Ether and BTC Didn’t Face Regulations Unlike New Projects: Ethereum and Bitcoin (BTC) did not have to comply with regulation, admitted Ethereum co-founder Joseph Lubin in an interview with industry news outlet Forkast published on Nov. 18.

During the interview — which took place at the Hong Kong FinTech Week — Lubin noted that new projects need to comply with regulations, and explained the impact of the application of security law to the cryptocurrency space.

Lubin said that — to attract investors — any project has to promise that its token will increase in price. Furthermore, given that the appreciation is usually obtained through the work of developers, by definition, an asset that is being sold is a security. Because of this:

“And so securities law is then implicated and now you can’t sell a utility token as it’s not a utility token, it’s a tokenized security. You can’t sell it broadly and equitably.”

B2C2 Founder: Unregulated Crypto Businesses “Will Keep Doing Well,” But The 2020 Election Might Change That: Low regulatory risk has incentivized cryptocurrency businesses to not play by the book and still be very successful, but the 2020 U.S. presidential election may make a difference, according to B2C2 founder Max Boonen.

In a recent The Scoop podcast, Boonen said cryptocurrency businesses that decide to avoid regulations and have relaxed KYC have been “extremely successful” due to low regulatory risk, mentioning EOS and Bitfinex as examples. In September, Block.one, the company behind the EOSIO protocol, settled with the Securities and Exchange Commission (SEC) for conducting an unregistered initial coin offering (ICO). While the company would pay $24 million in penalties for the settlement, it raised $4.1 billion from the ICO. In 2016, Bitfinex was ordered to pay a $75,000 fine to the U.S. Commodity Futures Trading Commission (CFTC) for offering illegal off-exchange financed retail commodities trading.

“I would think that based on history, the regulatory risk is not that high,” said Boonen. “Because at the end of the day, if you don’t touch the mighty U.S. dollar at any point, you know, what can they do to you?”

If Bitcoin Price Drops — an Opportunity for Crypto Tax Planning by Lokay Cohen, a vice president at Bittax, a crypto tax calculation platform.

Do Bitcoin Companies Need a Code of Conduct? on Bitcoin Magazine.

Equities Market Structure Expert: SEC Anti-bitcoin ETF Analysis Has ‘3 Main Flaws’: David Weisberger, co-founder and CEO of CoinRoutes, says there are three main flaws in the U.S. Securities and Exchange Commission’s (SEC) reasoning in delaying and rejecting applications for a bitcoin-based exchange-traded fund (ETF).

On October 9, the SEC denied a proposal by Bitwise and NYSE Arca to create a bitcoin-backed ETF, stating that the proposed ETFs did not meet the requirements of a section of the Exchange Act, which demands national securities exchange to “prevent fraudulent and manipulative acts and practices.” The rejection marks another vain attempt to establish the first bitcoin ETF.

Weisberger is the former managing director of Citigroup and was responsible for building out the company’s electronic trading systems. In a recent op-ed published in CoinDesk, he finds fault with the SEC’s argument for three main reasons.

First, there already exist many self-proclaimed bitcoin exchanges that meet the standards of money center or trust bank regulation, he says, and there has been no proven “fake and non-economic activity.” In fact, according to Weisberger, these exchanges provide sufficient liquidity for price discovery.

Second, he argues that compared to gold, silver, and other precious metals that have already been approved for ETFs, bitcoin offers a far greater level of transparency. While the former’s spot prices take place on a negotiated basis with a bid-ask spread of over 4%, bitcoin pricing can be accessed from a number of markets running electronic data and has a bid-ask spread of less than 1%.

Third, allegations of manipulation are present regarding other commodities as well, as demonstrated by the RICO case against precious metal traders in September. Weisberger believes that the SEC shows its bias by holding bitcoin to a higher standard given that bitcoin is neither more subject to potential manipulation nor operates in a market that is harder to monitor. It does not make sense to favor those commodities while delaying bitcoin’s ETF approval, he says.

Paypal CEO Claims He Wasn’t “Spooked” By Regulatory Scrutiny When He Withdrew From Facebook’s Libra: PayPal CEO Dan Schulman says that he pulls the company out of the Libera Association to focus on its core business, but regulatory risks associated with the project might also play a part. The company is working on its own blockchain and cryptocurrency projects although Schulman remains suspicious toward crypto.