One of the major attractions of cryptocurrencies for its advocates, and the major detriments of it for its detractors, is the fact that it is to all intents and purposes unregulated. People who want to use money without being subject to intrusion and paper trails are happy to have a way of transferring wealth – and in some cases spending – that protects their privacy. And so when crypto regulations are talked about, there are certainly some who pause and wonder what that will do for their use of these currencies.
It seems likely that, at some stage, a tipping point will come and major democracies will begin to place regulations on cryptocurrency. That point is probably going to come in the next few years, as governments are beginning to make noises about making such moves. Some countries already have laws in place and require licenses to run crypto companies such as in Lithuania via https://starlegal.lt/crypto-license-in-lithuania/. But what would that mean for you, if you are someone who likes to use crypto or who is interested in exploring it in times to come? Let’s take a look at the possibilities.
Who would be responsible for regulating crypto?
That’s something that is being debated. In order to regulate crypto, the relevant bodies will first need to classify it. This is because different regulatory bodies regulate different financial products depending on what the asset is classed as. Crypto has variously been used as a security (a means of asset storage) and a commodity (a way of trading wealth), and while the first group is regulated by the SEC, the latter is regulated by the CFTC. Whether a new body would need to be created which could regulate everything, including the operations of crypto casinos, is another question. But this shows how complex things will get.
What would they seek to do?
The likelihood is that any regulation of crypto would be fairly light-touch. The reason for this is that for regulation to be in any way operable, it will need to be passed at a federal level. This means it will need to be palatable to enough lawmakers to make its way through both houses of Congress. In order to pass, it will need to be relatively uncontroversial. So there won’t be huge restrictions on how crypto can be used, and it is unlikely that it will lose all of its privacy protections, because those would be big red flags for many lawmakers.
What may happen is that there will be requirements on any brokerage or investment firm. A likely move is that brokerages would be barred from offering inducements to invest – so offering cash back for buying crypto would be out of the question.
Will this happen in the next 18 months?
Probably not. 2024 is an election year, and crypto regulation is not an issue of enough saliency to be considered a “right now” piece of legislation. Making it a priority when there are bigger issues to be resolved in the here and now is likely to be politically unpopular, and would cost votes without winning enough new ones to replace them. So any regulation is likely to wait until after November 2024 when the next Presidential election takes place.