Regulation
A legal expert discusses how the US political climate could redefine crypto regulations
Crypto.news recently spoke with Bing Wang, Chief Legal Officer at BasedVC, who shared his perspectives on the political rise of cryptocurrencies and upcoming regulatory transformations.
As the 2024 US election approaches, the political landscape around cryptocurrencies is undergoing major changes.
Surprising alliances are forming in Congress, with crypto-friendly laws gaining bipartisan support. Key figures like Chuck Schumer and former House Speaker Nancy Pelosi, who have traditionally held divergent views, are now emerging as unexpected allies.
The Biden administration has begun to show a newfound openness with crypto policy, suggesting that skeptics like Senator Elizabeth Warren may soon find themselves isolated.
On the Republican side, former President Donald Trump has stepped up its support for the crypto community, pledging to protect digital asset traders and accepting donations for cryptocurrency campaigns.
It is quite clear that the role of cryptocurrencies is expected to be a crucial issue this year, something that could shape the future regulatory landscape for the emerging sector.
Wang believes this shift in political dynamics will accelerate the adoption and integration of cryptocurrencies in the United States
How significant do you think the role of cryptocurrencies will be in the 2024 US elections?
Cryptocurrencies have always been important in US politics. The famous case of Sam Bankman-Fried and FTX saw him funnel cryptocurrencies to candidates in the US midterm elections. However, the impact in the next elections in 2024 will be enormous. With pro-cryptocurrency legislation passing through Congress in the last 3 weeks, Democrats and Republicans are pushing to embrace cryptocurrencies even more. The elections will have cryptocurrencies on the agenda and having positive sentiment towards them will be a key talking point.
The Biden administration has shown a shift in its stance on cryptocurrencies, highlighted by the approval of spot Ether ETFs and dialogue with cryptocurrency industry experts. What impact might these changes have on the cryptocurrency industry, and do you think they will address the concerns of cryptocurrency enthusiasts who have criticized the administration’s previous policies?
The Biden administration’s sudden change in stance is a huge moment for cryptocurrencies. Some say this is an attempt to deceive the electorate, but that doesn’t matter, as it appears to address concerns the industry has long had. The House has passed a bill to repeal the Securities and Exchange Commission’s crypto guidance that has had the regulator in a negative grip on the market. If signed into law, the new bill will help overhaul the SEC and CFTC’s oversight of cryptocurrencies and create more streamlined guidance on cryptocurrency regulation. This is a huge win for the industry.
Considering the bipartisan support for cryptocurrency-related 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 is underway to revive previously moribund crypto bills. Biden’s campaign has begun discussing digital asset policy with Democratic allies, while Stabenow’s bill to overhaul how the SEC and CFTC share oversight of cryptocurrencies is back on the table. Legislation on stablecoins is also being negotiated in the Chamber. The next few years are expected to see a flurry of laws that attempt to give a clear path on the regulation of cryptocurrencies, something that most cryptocurrency companies have been aspiring to.
Do you think government engagement with cryptocurrency industry experts will help improve public understanding and awareness of cryptocurrency technologies?
Just as the Senate has sought to engage with social media companies like Facebook, TikTok and X (formerly Twitter), stakeholders need to meet in roundtables to discuss pressing issues. Avoiding meetings with cryptocurrency industry experts can only prove harmful in the long run. As conversations continue, I firmly believe this will help increase trust in digital assets.
What are your thoughts on the potential consequences of appointing crypto-friendly officials to key regulatory positions?
Well, crypto-friendly officials generally mean quicker decisions and a more positive outlook towards cryptocurrencies from key decision makers. I don’t see any downside to this move except that it will help improve policy making in the cryptocurrency industry. Anti-cryptocurrency crusades by uninformed officials will only boil over with time and most will have no choice but to go along with the agenda.
How might US political changes impact the growing interest in self-custody and privacy within the crypto community?
Changes in policy will have a significant impact on how cryptocurrencies influence the crypto landscape. Increased scrutiny will undermine the privacy features of some cryptocurrencies, as regulators may require a more rigorous approach to transaction traceability and transparency. Stricter KYC and AML requirements may be adopted.
And what might the broader implications be for cryptographic security and user autonomy?
This could also cause development in the industry, as better hardware and innovative cryptographic methods could arise from regulatory approaches with the aim of improving privacy and security. The downside could be that regulatory actions could cause a rift between the decentralization ideology that cryptocurrencies were created for and the centralized custodian services of the traditional financial system.
How do you think regulators will respond to the growing demand for privacy and self-protection in the cryptocurrency community?
Regulators have a few options for this. First, regulators could undertake educational initiatives to enlighten the public on the best ways to secure their tokens and use privacy-enhancing technologies. Second, startups and crypto companies could be allowed to test regulatory sandboxes for experimental purposes without full commitment to compliance requirements. This could help test privacy and self-custody solutions under supervised conditions. Another approach is to find a balance between privacy and regulation. Regulators can allow privacy features in cryptocurrencies, balancing them with the mandate to impose controls in case of illicit activity or terrorist financing.
What impact might growing 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 major financial partners, Ripple and Andreessen Horowitz, invested approximately $161 million to spend on the 2024 US elections, the huge obstacle, the US legislature, has started to change its tune. Crypto-focused PACs are interested in increasing 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 a backlash from the traditional financial sector?
Traditional financial systems already see cryptocurrencies as a threat. With government support, cryptocurrencies could be at the top of the kill list. This can take several forms, including regulatory pressure from lawmakers, technological resistance by refusing to integrate cryptocurrencies into their operations, the imposition of barriers for crypto firms to operate on their platforms, and even public relations campaigns to discourage the public from adopting cryptocurrencies.