Strong Regulations Must Govern Cryptoassets
Since I began work in the cryptoasset industry in 2017, my position has been that for all their problems and challenges, blockchain technologies and cryptoassets are here to stay. Because there is such substantial institutional investor demand for cryptoassets they must be strongly regulated in a manner that supports transparency and fairness.
As I’ve written, I participated in a Blockchain Association (a cryptoasset industry lobby) event in DC last November. We spoke with congressional aides about the need for stronger legislation of cryptocurrency and cautioned against proposed rules that, while possibly increasing cost and complexity of compliance, would likely be ineffective in their stated goals of reducing terror funding and money laundering.
Last December, Senator Elizabeth Warren (D, MA) wrote a letter to the Blockchain Association setting forth a grotesque reading of the nature of the letter I co-signed. In her letter, the senator stated that the signatories were all part of an “appalling” abuse as “revolving-door” professionals “…[fight] tooth and nail to stonewall common sense rules designed to restrict the use of crypto for terror financing – rules that could cut into crypto company profits.”
The senator’s conclusions about of my (and the association’s) position are unhelpful. You can read the Blockchain Association’s response here.
As I and others said to Congressional staffers we met with, and as the association has said publicly and privately, “Make no mistake: no funds — in any form — should be used to support organizations or state entities intent on harming people. The digital asset industry stands firmly with the United States and our leaders in Congress in punishing bad actors and rooting them out of this nascent technology.”
The legislation that has been proposed in Congress in my opinion would probably make enforcing the law and protecting national security more difficult - in other words, it would have the deliterious effect of both rendering useless new laws against terror funding, while simultaneously driving cryptoasset activity offshore, out of the control of US legislators.
This AML-and-Terror-First approach ignores other pillars; while its legislative agenda is mired in a sea of protection of sovereign national currencies, even the IMF says “predictability and enforceability of rights while appropriately classifying crypto” must come first.
In writing about crypto legislation I am reminded of the political quest for anti cyber-crime laws: declaring war (on cyber-crime, on terror, on drugs) is easy. It costs nothing, and politicians think it makes them look “tough.” It will fail in protecting against the dark side of crypto in exactly the same way that the approach failed in the global war on drugs.
Like murder, money laundering and terror-funding are already illegal. To succeed in stanching illegal transactions, legislation must address root causes. We need regulations that bring transparency and accountabilty to the cryptoasset market.