tl;dr
In response to the failure of the CLARITY Act, FinCEN and the CFTC are hard at work clarifying the regulatory framework for crypto adoption in the US.
Market Snap
Market Wrap
Both the S&P 500 and Nasdaq 100 posted record closes yesterday. Earlier today, Iran stepped up its attacks on tankers in the Strait of Hormuz sending BTC down by nearly $2k, largely led by forced liquidations of the leveraged children. The amount of oil flowing through the Strait is now back to nearly the same as before Trump attacked Iran, whilst Iran itself is struggling to export any at all. Oil prices remain elevated because of the fears of a re-escalation, fears justified by this overnight news.
Curious Cryptos’ Commentary – FinCEN
The Financial Crimes Enforcement Network (FinCEN) has announced the withdrawal of two proposed rules that formed a key plank of Operation ChokePoint 2.0, an illegal and immoral attempt to stymie the crypto revolution.
The Crypto Council for Innovation makes its views plain. As we know, the CCI is rarely wrong:
The 2020 unhosted wallet rule targeted self-custody wallets. Regulated institutions would have had to file a report and verify customers’ identity when certain thresholds were reached. Make no mistake – this was a rule designed to encourage banks to cut off access to legitimate clients who use self-custody wallets.
The second proposal, which has now also been dumped, dated from 2023. It would have imposed extra reporting requirements on transactions involving crypto mixers.
The justification in both cases was that these proposals were targeting the illegal use of cryptos, a stance that has no legs. Fiat plays a far bigger role in the money-laundering business of drug-dealers and terrorists. J.P. Morgan has been fined billions of dollars for facilitating the illegal use of fiat. Perhaps banning J.P. Morgan would be a more effective measure.
Curious Cryptos’ Commentary – CFTC
The US Commodity Futures Trading Commission (CFTC) is back publishing new crypto proposals, which are largely aimed at providing the clarity that the CLARITY Act failed to deliver.
During remarks at the Fordham Law Blockchain Regulatory Symposium in New York, CFTC Chair (and only commissioner) Michael S. Selig wants to clarify the regulatory structure for platforms offering leveraged trading of cryptos. Specifically, Michael has proposed a tailored federal framework for “… firms offering retail customers the ability to trade crypto assets on a margined, leveraged, or financed basis”.
Michael also referred to the uncertainty surrounding decentralised platforms:
“Although outside the scope of today’s proposals, we are also exploring a durable policy for developers who publish software but do not solicit or take orders, control execution, or hold customer assets. A person should not have to register as an introducing broker simply because that person shipped code.”
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Why does any of this matter?
Several US agencies are sending very strong signals that the US is open for crypto business. Over to Michael once again:
“Satoshi’s technological revolution has transformed global financial markets. If America can embrace this paradigm shift and get the right regulations in place, we can usher in a golden age like those that followed the transformative technologies of the past.”
Embedding the crypto revolution into the fabric of the US financial system is an urgent task, with a more antagonistic political outlook expected following the mid-terms. Michael and his fellow regulators are getting on with this very task.