Regulation
Legal Expert Explains How US Political Climate Could Redefine Crypto Regulations
Crypto.news recently spoke with Bing Wang, Head of Legal at BasedVC, who shared his views on the political rise of cryptocurrencies and the regulatory transformations ahead.
As the 2024 US elections approach, the political landscape around cryptocurrencies is undergoing major changes.
Surprising alliances form in Congress, with crypto-friendly laws gain bipartisan support. Key figures like Chuck Schumer and former House Speaker Nancy Pelosi, who traditionally held divergent views, now emerge as unexpected allies.
The Biden administration has begun to show a rediscovered openness with crypto policy, suggesting skeptics like Sen. Elizabeth Warren may soon find themselves isolated.
On the Republican side, former President Donald Trump stepped up its support for the crypto community, committing to protecting digital asset traders and accepting campaign donations in cryptocurrency.
It is clear that the role of cryptocurrencies is expected to be a central issue this year, which could shape the future regulatory landscape of the emerging sector.
Wang believes this change in political dynamics will accelerate the widespread adoption and integration of cryptocurrencies in the United States.
How important do you think the role of cryptocurrencies will be in the 2024 US elections?
Crypto has always played an important role in American politics. The famous case of Sam Bankman-Fried and FTX involved him funneling crypto money to candidates in the US midterm elections. However, the impact on the next elections in 2024 will be disproportionate. With pro-crypto legislation passed by Congress over the past 3 weeks, both Democrats and Republicans are moving toward even further crypto adoption. The elections will have crypto on their agenda, and having positive sentiment towards it will be a key talking point.
The Biden administration has shown a shift in stance on cryptocurrencies, as evidenced by the approval of spot Ether ETFs and engagement with crypto industry experts. How might these changes impact the cryptocurrency industry, and do you think they will address the concerns of crypto enthusiasts who have criticized the administration’s previous policies?
The Biden administration’s sudden change in stance is a major moment in crypto. Some have alleged that this is an attempt to mislead the electorate, but that doesn’t matter because it appears to address long-standing industry concerns. The House has passed a bill to repeal the Securities and Exchange Commission’s crypto guidelines that have caused the regulator to exert negative influence on the market. If signed into law, the new bill will help overhaul crypto oversight by the SEC and CFTC and create a more streamlined guide for crypto regulation. This is a big win for the industry.
Given the bipartisan support for cryptocurrency legislation, such as the Deploying American Blockchains Act and the FIT21 Act, what specific regulatory changes can the crypto community anticipate in the coming years?
Pro-crypto senators are banding together and an attempt to revive previously moribund crypto bills is underway. The Biden campaign has begun discussing digital asset policy with Democratic allies, while Stabenow’s bill to overhaul how the SEC and CFTC share crypto oversight is back on the table. Stablecoin legislation is also being negotiated in the House. The coming years are expected to see a wave of legislation that will attempt to provide a clear path for crypto regulation, something most crypto companies aspire to.
Do you think the government’s engagement with crypto industry experts will help improve public understanding and awareness of cryptocurrency technologies?
Just as the Senate has attempted to collaborate with social media companies like Facebook, TikTok and X (formerly Twitter), stakeholders must come together in roundtables to discuss pressing issues. Avoiding meeting crypto industry experts can only prove detrimental in the long run. As discussions continue, I strongly believe this will help build trust in digital assets.
What do you think about the potential consequences of appointing pro-crypto officials to key regulatory positions?
Well, crypto-friendly officials will generally mean faster decisions and a more positive view of crypto from key decision-makers. I don’t see a clear downside to this decision, except that it will help improve policymaking in the crypto space. Anti-crypto crusades led by ill-informed officials will only simmer over time, and most will have no choice but to buy into the program.
How might changes in US policy impact the growing interest in self-custody and privacy within the crypto community?
Policy changes will have a significant impact on how crypto affects the crypto landscape. Increased scrutiny will undermine the privacy features of some cryptocurrencies, as regulators may require a stricter approach to transaction traceability and transparency. Stricter KYC and AML requirements may be put in place.
And what might be the broader implications for cryptographic security and user autonomy?
This could also lead to development in this area, as better hardware and innovative cryptographic methods could arise from regulatory approaches aimed at improving privacy and security. The downside could be that regulatory measures could cause a divide between the decentralization ideology that cryptos are created for and the centralized custody services of the traditional financial system.
How do you think regulators will respond to the growing demand for privacy and self-custody in the cryptocurrency community?
Regulators have several options for this. First, regulators can embark on educational initiatives to enlighten the public on the best ways to secure their tokens and use privacy-enhancing technologies. Second, startups and crypto companies may be allowed to test regulatory sandboxes for experimental purposes without fully committing to compliance requirements. This could enable testing of privacy and self-custody solutions under supervised conditions. Another approach is to strike a balance between privacy and regulation. Regulators can allow privacy features in cryptocurrencies while balancing them with the mandate to impose control in cases of illicit activities or terrorist financing.
What impact might increased political activism and organizing within the crypto community, such as the formation of crypto-focused PACs, have on the legislative process?
Since Coinbase and its main campaign finance partners, Ripple and Andreessen Horowitz, invested approximately $161 million for the 2024 US elections, the major obstacle, the US legislature, has started to change its tune. Crypto-focused PACs want to increase the number of pro-crypto members, and that is exactly what is being done. The next Senate and House of Representatives are expected to have more pro-crypto lawmakers than ever before. This can only mean one thing: more crypto-positive laws or regulations.
Could growing government support for cryptocurrencies and blockchain technology lead to backlash from the traditional financial sector?
Traditional financial systems already view crypto as a threat. With government support, crypto could top the list of victims. This can take many forms, including regulatory pressure from lobbying legislators, technological resistance by refusing to integrate crypto into their operations, imposing barriers for crypto companies to operate on their platforms, and even public relations campaigns to discourage the public from adopting crypto.