On Cryptocurrency Regulations and More
Last week, Securities and Exchange Commission chair Gary Gensler said:
“The investing public is buying or selling crypto security tokens because they’re expecting profits …
"These are not laundromat tokens. Promoters are marketing, and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others ...
"Nothing about the crypto markets is incompatible with the securities laws … Investor protection is just as relevant, regardless of underlying technologies … Investors deserve to be protected against fraud and manipulation. The law requires these protections.”
Separately, Federal Reserve chair Jerome Powell commented on stablecoin legislation and said:
“We don't want to stand in the way of appropriate innovation … But we think that something like that which is purporting to be money would need to be appropriately regulated …
"I don't think you want to take money and make it into just another consumer product.”
Note: A stablecoin is a cryptocurrency whose value is pegged to the price of another asset, such as the U.S. dollar.
Also, Acting Comptroller of the Currency Michael Hsu said,
"I believe fintechs and big techs are having a large impact and warrant much more of our attention …
"I worry increasingly about the 'unknowns' and am concerned that the less familiar risks of this digital transition are unlabeled and thus unseen. As we learned from the 2008 financial crisis, risks that are unseen have a tendency to grow and later to be the source of nasty surprises."
Finally, the International Monetary Fund blog post “Reimagining Money in the Age of Crypto and Central Bank Digital Currency” said:
“The future of money is undoubtedly digital. The question is, what will it look like?
“Of course, digital money has been developing for some time already. New technologies hope to democratize finance and broaden access to financial products and services. A main goal is to achieve much cheaper, instantaneous domestic and cross-border payments. The gains could be especially great for people in developing countries.
“It’s too early to tell how the digital landscape will evolve. But with the right policy and regulatory choices, we can imagine a future with a mix of government and privately backed currencies held safely in the digital wallets of billions of people.”
OUR TAKE
As U.S. government oversight of cryptocurrencies increases, market participants will have to navigate directives from various agencies (SEC, CFTC, Labor Department, etc.), Federal and State legislation, and case law developments.
Regarding the U.S. government issuing a digital currency; these efforts remain at an early stage of consideration.
Notes on the Ethereum Merge (planned for Sept. 15): This high-profile effort transitions the platform's architecture from “proof of work” to “proof of stake." Because it does not address performance and transaction fees issues, innovators with the opportunity to introduce additional digital asset approaches.