Smart Crypto Regulation Hits the Floor

by Beth Canova
By Beth Canova

“Regulation” is often treated as a dirty word in crypto communities. And, sure, in a space that values decentralization, the idea of regulation from a centralized authority doesn’t really fit.

Add in the bad faith attacks from regulators — such as the Securities and Exchange Commission’s lawsuits against Coinbase (COIN), Binance and Ripple (XRP, “B-”) and Sen. Elizabeth Warren’s (D-MA) recent letter calling crypto “a national security threat” in response to a report erroneously claiming Hamas had raised $130 million in crypto — and it’s no wonder that crypto enthusiasts’ hackles are raised at the word.

But smart regulatory measures are integral to mass adoption.

Measures such as clearer guidelines for exchanges, regular audits and stronger protections for customer funds are needed and could lead to a more stable and mature crypto market … and can help the broad crypto space regain public trust by putting a greater emphasis on transparency, accountability and regulatory compliance.

With those protections in place, more retail and institutional investors will be willing to come on board.

Equally as important is the fact that regulation gives crypto projects clear parameters to operate within, making it easier to operate and source financing for new and existing projects.

That, in turn, will fuel growth for the broad market.

Fortunately, the U.S. has taken a small but significant first step in promoting common sense regulation this week.

House Majority Whip Rep. Tom Emmer has added a provision to the House spending bill — H.R. 4664 — that would require the SEC to get Congressional approval before using government funds to enforce “activities related to digital asset transactions.”

Like I said, it’s a small first step. The provision passed unopposed in the House, but it’ll still have to face a reconciliation committee before it’s fully passed.

If passed, however, this provision will be instrumental in culling the currently anti-crypto SEC’s campaign against the sector, while still providing space for smart regulation and regulatory enforcement.

Between this and the Supreme Court recently admonishing the SEC for its inconsistency regarding the spot Bitcoin ETF applications, the signs are clear: The government has lost its appetite for regulation through litigation.

So, what can we expect from U.S. lawmakers next? Well, a few bills are currently going through the chambers of Congress, including …

H.R. 4841 - Keep Your Coins Act, which enshrines in law investors’ right to own a self-custody wallet.

“Not your keys, not your crypto,” is the slogan of the space for a reason. Having the right to own and transact your own crypto without a third party legally protected is a massive step in legitimizing crypto.

H.R. 4763 - Financial Innovation and Technology for the 21st Century Act, a market structure bill that would finally define the oversight roles of the Commodity Futures Trading Commission and the SEC regarding crypto.

It also states that the existence of an investment contract alone does not make a token a security —something the SEC has alleged loudly and repeatedly over the past year in its various lawsuits, to gain more oversight and control over the space.

While the SEC lost its lawsuit against Ripple and Coinbase over this exact argument, this bill would codify the Supreme Court’s decision and the limits of regulatory reach into law.

H.R. 5045 - Blockchain Regulatory Certainty Act, which seeks to protect blockchain developers. This act ensures developers who do not custody crypto on their blockchain or dApp aren’t considered money transmitters and do not need licensing or registration.

This legal certainty will hopefully give the confidence to noncustodial blockchain developers or service providers — including miners, validators and wallet providers — to stay in the U.S.

If passed, these would be “smart” regulations — ones that set clear parameters for how the various actors within crypto should operate without stifling growth and stepping into overregulation. 

It’s heartening to see, especially after the particularly contentious year we’ve had between crypto and regulators.

As we head into the beginnings of the next bull market, many investors are acutely aware that smart regulation can make a huge difference in how high this cycle can take us.

If you’re already invested in the crypto space or looking to get in for the coming bull run, I’d suggest keeping an eye on how these bills move through Congress.

That would be a solid indicator for how friendly the U.S. is willing to get in regard to crypto.


Beth Canova

Managing Editor

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About the Contributor

Beth Canova is a veteran of the publishing industry, specializing in cryptocurrency-related information and guidance. As the Managing Editor of some of the world’s most astute cryptocurrency experts — Juan Villaverde, Dr. Bruce Ng, Marija Matić and others — she's continually immersed, and well versed, on everything crypto.

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