Crypto regulations developments in the United States and Europe
Most of us know that the crypto industry is still largely unregulated. As Governmental institutions are slow entities and around the world, they are still conducting research to figure out what the best regulatory approach is. Over the past month, there were two major developments in this area: Biden’s executive order and the voting on the banning of Proof-of-Work tokens in Europe. Let’s dive in!
Biden’s executive order
On May 9th, 2022, Joe Biden the president of the US, issued an executive order aimed to bring some regulation to the crypto markets. This order was pro-innovation and called for a ‘whole government’ approach. This is a play in favor of crypto as Biden calls for various parts of the federal government to coordinate their efforts collectively and craft guidance for the rapidly growing crypto industry.
The order refrains from setting any specific policy objectives apart from consumer protection, responsible innovation and ensuring financial stability. These goals are pretty common and unsurprising. One of the main goals is coordinated research on a central bank digital currency and guardrails to prevent crypto manipulation, fraud and abuse. Nevertheless, the order shows that the United States is moving forward with the regulation on crypto in 2022. Some think regulation is bad for the markets. All of this is actually quite good as it ensures a safer environment for anyone to operate in.
Fortunately, the order had the support of a majority consisting of both Democrats and Republicans. Many stated that the order is a step in the right direction and will strengthen the [American] financial resilience and national security as it prevents bad actors from using crypto to evade the law.
Europe votes on Proof-of-Work ban
This week, the European Committee voted on a proposed rule in the MiCA (Markets in Crypto Assets). The MiCA is a uniform framework regarding cryptocurrencies for the European Union. In essence, the MiCA is a package that consists of various rules aimed to bring more guidelines, rules and guardrails to the issuance and provision of services related to crypto-assets. This framework would embody all things related to crypto in the EU; from digital assets to the crypto markets and related services. The goal of MiCA is to ensure a high level of consumer/ investor protection and bring integrity into the digital asset markets.
The rule being voted on this week was on the potential banning of Proof-of-Work cryptocurrencies, like Bitcoin and Ethereum. You can already imagine the potential consequences such a ban would have on the markets if implemented. The rule was added because of the risk Proof-of-Work cryptocurrencies pose to the environment. If approved, the rule would obsolete all activities related to Bitcoin, Ethereum and other mining tokens.
Fortunately, the proposal was rejected by a majority in the Committee. Even if the majority was in favor of the rule., multitude of other stages had to occur for the rule to be implemented making it unlikely that it would have been actually implemented.
The world is slowly moving towards regulated crypto markets. The immense growth of the industry has led to increased concerns on consumer protection and other risks, like fraud, manipulation and abuse. Governmental bodies around the world are conducting research on the correct way to regulate cryptocurrencies, which in itself is a good sign long-term. This would mean that cryptocurrencies would be recognized as legitimate investment vehicles. It will remove the negative bias many people have towards blockchain technology.
Over the past two weeks, Europe and the United States have shown to position themselves relatively positive towards crypto. Biden issued an executive order calling for a ‘whole government’ approach. Various federal government institutions will collectively work on research and guidelines for the crypto industry. On the other hand, Europe held an important voting meeting regarding a rule in the MiCA framework. The rule would impose a ban on all Proof-of-Work crypto currencies in the European Union. This included all activities related to Ethereum and Bitcoin, meaning an approval could potentially be disastrous for the markets. Fortunately, a majority of the Committee rejected the proposed rule.
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