Until a few years ago, crypto was mostly unknown among the Washington crowd. Those policymakers and lawmakers who knew about this emerging technology were few, and because of its lack of tangibility, many thought of it as a plaything for nerds or a tool for bad actors. In short, crypto was taken seriously by only a select few in Washington.
Today, crypto has not only shed this misguided perception but has also begun to gain broad acceptance by members of Congress and the general public alike. Crypto is reaching a level of mass adoption among the American people, and there is increased recognition of the benefits that crypto has to offer on both sides of the political aisle.
Additionally, both Democrats and Republicans recognize that regulatory clarity is needed. The past year has seen the introduction of three bipartisan bills seeking to bring clear regulation to the crypto industry. Although these efforts to bring regulatory clarity to the crypto industry are encouraging, Congress is not the only governmental body that has “woken up” to crypto and the need for tailored and appropriate regulation in the space.
Regulatory agencies like the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC) have made great efforts to understand the technology and incorporate it into the U.S. regulatory landscape. FinCEN, in guidance published in 2019, established which crypto entities qualify as money services businesses (MSBs) and thus have to comply with the requirements of the Bank Secrecy Act. Similarly, the OCC established prudential regulatory standards for banks doing business with crypto firms through a series of interpretive letters in 2020 and 2021. Interestingly and encouragingly, both the current and previous comptrollers of the currency, one a Republican appointee and the other a Democratic appointee, have worked on and approved of these interpretive letters.
Although crypto is increasingly being brought into the regulatory and legislative fold by bipartisan regulators and members of Congress, there is still lingering suspicion and hesitation, which has led some to push back against all aspects of crypto, including regulatory and legislative efforts like the ones described above. A group of policymakers, for example, recently sent a letter to the OCC requesting that the acting comptroller rescind the aforementioned interpretive letters.
The best way forward for crypto and its millions of U.S. users is to embrace appropriate and tailored regulation and the consumer protection and transparency it brings. Regulatory efforts like the OCC’s interpretive letters have paved the way for increased consumer protection and insulation from further negative events associated with the industry and broader economic downturn. Indeed, Acting Comptroller Michael Hsu recently explained: “a whole bunch of stuff just happened, and the banking system is in pretty good shape, knock on wood. I think part of that is the actions we’ve taken.”
Increased regulatory clarity also encourages crypto businesses to do business in the United States, bolstering the economy, growing American jobs and increasing the effectiveness of U.S. national security by augmenting the scope of U.S. sanctions and anti-money laundering laws.
As policy and lawmakers continue to grapple with applying U.S. regulatory standards to the crypto ecosystem, efforts should focus not on dismantling current crypto regulations but on filling the regulatory and legal gaps that underscore market turmoil and failures and thus exacerbate consumer losses. Regulatory clarity for the crypto industry is desperately needed. Rather than rescind existing guidance, Washington should issue further regulatory guardrails to allow the crypto industry to do what it does best: innovate.
Lindsey Kelleher is a senior policy manager for Blockchain Association (BA), a Washington, D.C.-based trade association.
