Regulation
Former Biden Advisor Predicts Imminent U.S. Crypto Regulations
The double-edged nature of cryptocurrencies has become increasingly evident, particularly in their role in facilitating child sexual abuse material (CSAM). Speaking to crypto.news, former White House insider Moe Vela said he expects the government to intervene soon.
US Senators Elizabeth Warren and Bill Cassidy attack the cryptocurrency sector, raising concerns about it. Federal agencies have been asked to strengthen their ability to detect and prosecute CSAM-related cryptocurrency transactions.
Their call comes at a critical time when privacy-focused cryptocurrencies and mixing services have been identified as CSAM-derived money laundering tools, as detailed in recent studies from Chainalysis and the Financial Crimes Enforcement Network ( FinCEN).
The senators’ concerns prompted the Department of Justice (DOJ) to take action against platforms like KuCoin And Binance, which related to charges related to operating an unlicensed money transfer business and handling suspicious transactions. The call for stronger regulation and industry-wide oversight is evident as agencies continue to develop new tools and strategies to combat the growing misuse of digital assets for criminal purposes.
Offering his perspective on this critical issue, Moe Vela, Senior Advisor to Unicoin and former Senior Advisor to President Biden, shared his views in an exclusive interview.
Recent events have raised concerns about cryptocurrencies facilitating illegal activities such as CSAM. As Senators Warren and Cassidy call for stricter regulations, what impact do the proposed changes have on the crypto market, particularly in combating illegal activity?
These horrible challenges are inevitable with the introduction of a new currency or financial system. The fact that this is a bipartisan approach will bring additional viability to the efforts of both senators in implementing certain solutions. I predict that over the next year our country will have crypto regulation that I hope will be preventative, informative and empowering in nature, but NOT industry destructive. The federal government must respond reactively to the temptation to over-regulate. Healthy regulation is inevitable and necessary.
Building on the senators’ concerns, what regulations do you consider essential to mitigating the risks associated with cryptocurrencies enabling child sexual abuse material (CSAM)?
I am confident that the end result will be a U.S. regulatory environment with respect to cryptocurrency that will reflect many of the parameters, restrictions and protections of the regulatory standards of traditional monetary and financial systems.
Given the anonymity and decentralization of cryptocurrencies, which can enable illicit activities such as the purchase of CSAM, how crucial is government involvement in fostering transparency and ensuring that crypto -currencies are backed by real assets?
As a senior advisor to Unicoin, this is a topic that I am very passionate about. I believe the federal government has a critical role to play in creating a regulatory environment that promotes and encourages transparency, as well as asset-backed cryptocurrencies. As I have said publicly for several years, buying Bitcoin could very likely put you in contact with nefarious forces and possibly some of the most dangerous dictators and nations in the world. Not to mention that with these first cryptocurrencies you are simply buying and exchanging air. I don’t understand why investors feel safe and confident buying non-asset-backed securities.
How can we balance regulation and promoting innovation to ensure compliance without stifling the industry?
I am one of those in the cryptocurrency industry who advocates full transparency and compliant, asset-backed crypto. The regulations that will be necessary and to come will, in my opinion, be less strict and less severe with respect to the risk mitigating nature of asset-backed cryptocurrencies, transparent and compliant.
Drawing inspiration from traditional financial systems, how can safeguards be adapted to the decentralized nature of cryptocurrencies to prevent abuse, particularly in cases such as CSAM transactions?
In several speeches on this topic in recent years, I have emphasized how critical it is that we examine what has worked well in traditional financial systems and what regulations have been effective in preventing CSAM transactions and other egregious activities. We simply adopt what has worked and ignore what has proven ineffective as crypto regulatory settings are developed and implemented. There is no need to completely reinvent the wheel. This is a new and young frontier, but the lessons of the past will be essential in setting the tone for the future of industry regulation.
On a broader scale, given global financial and security standards, how important is international collaboration in developing regulations addressing the use of cryptocurrencies in illegal activities?
The global nature of cryptocurrency, digital, and financial systems makes it absolutely mandatory for the United States to collaborate with its allies around the world. It is imperative that crypto regulatory standards are respected, adhered to and enforceable across geographic boundaries. This digital and blockchain era knows no geographical boundaries, so regulations, laws and policies must be geo-blind.
Finally, what proactive roles should cryptocurrency exchanges and wallet providers take to prevent the use of their platforms for illegal transactions, including CSAM?
Above all, every cryptocurrency wallet provider and exchange should not wait for government regulations and guidelines. Everyone involved in the crypto and blockchain ecosystem MUST be proactive and implement corporate policies and procedures that mitigate the risk of nefarious activities, including CSAM. In Texas, where I grew up, it seems like you have to take the bull by the horns.
Then what do you suggest?
Playing offense and not waiting to play defense is a consistently strong approach when it comes to these regulatory and policy discussions. It is very important that the sector comes together and is part of the solution: it is irresponsible to wait until regulations are developed and implemented and then complain. Now is the time to get involved and be at the table as they are developed and discussed.