“Let the crypto build,” said Congressman Tom Emmer

The last “crypto winter” after the collapse of Terra / LunaLUNA and withdrawals from other stablecoins has resurfaced attacks on the web3 community on the basis of insider trading and financial instability.

The virtual attacks have led federal regulators, including Deputy Reserve Chairman Lael Brainard of the Federal Reserve, to call for the development of central banks’ digital currencies. However, these shortcomings in crypto should also be linked to the lack of fiat currencies, acknowledging that a lot of illegal money laundering and insider trading is also taking place with the dollar.

Despite the recent attacks on crypto, society is growing. Gary Vaynerchuk convened a diverse and energetic group of people, including celebrities such as Eva Longoria and Snoop Dogg, at the first VeeCon 2022, held in Minneapolis, Minnesota, May 19-22.

Also present was Congressman Tom Emmer, R-MN, who discussed the challenges and pitfalls of crypto that may lie ahead due to the ghost of federal regulation and intervention.

Referring to the recent deterioration of Terra / Luna, Emmer said: “I am concerned that we are rushing to solve a problem that many people in Congress do not understand,” Emmer said. In particular, decision-makers have discussed how to define a high-quality liquid asset, but the risk over-regulates it and stifles competition and creates new forms of fragility.

“I am concerned that our government will define it as exclusively US dollars,” he said.

The solution, according to Emmer, is no more regulation, but rather a taxonomy from Congress that establishes definitions and creates a framework for embedding web3. There is no debate that there is a role for federal policy – markets require a framework, or “rules of the game”, to function properly. But “it must be a regulatory environment with light touch,” Emmer said. “We can not try to put crypto into a framework that is almost 100 years old. Many regulators try to do just that by defining securities according to the three functions of the ‘Howey test’ established in 1933 as a result of the Supreme Court case. . “

According to the Howey test, a security has three defining features: (1) it is an investment of money, (2) it is a joint venture, and (3) it is a reasonable expectation of profit from the efforts of others. Under a strict interpretation, houses will be considered a security for consumers: in addition to the obvious investment of money, they are usually a joint venture (ie a family merging resources) and the value of the house increases in part due to national or local economic and demographic trends.

Assess the emergence of non-fungible tokens (NFTs); many NFTs value, in part because of the robust community that forms around them. But if such a strict – and outdated – interpretation of securities were used, millions of lives would change overnight: home ownership could fall and the emerging creative economy that has grown rapidly in recent years through the sale of NFTs would be discouraged from ever starting. creative projects.

Even worse, creators would flee the United States and build elsewhere. “They want to move activities offshore because they have to,” Emmer said. “We [Congress] must be advocates and define what fits the definition of currency, commodity, security … if we do, we can give specific cowboys to regulators. “

In the absence of a framework, federal regulators risk taking an ad hoc approach to managing crypto and web3, disrupting the lives of builders and society in the process.

Ultimately, the debate about the future of web3 regulation is a matter of choice and personal responsibility. “I trust myself more to make my own mistakes, make mistakes, find out and climb back to the top of the hill, instead of letting my authorities say ‘you have to be careful that someone can exploit you, so we will never give you the opportunity to fail or succeed, “said Emmer.

Senators Cynthia Lummis, R-WY, and Kirsten Gillibrand, D-NY, introduced a bill outlining new comprehensive regulation for cryptocurrencies, including a tax exemption on transactions under $ 200 and a clearer definition of cryptocurrencies versus cryptocurrencies. The bill aims to “provide clarity to both industry and regulators, while maintaining the flexibility to account for the ongoing development of the digital assets market.”

Although the proposed legislation is an important step towards greater regulatory clarity, it may also open the door for those looking for opportunities to expand control of the web3 landscape.

This story was provided to Newsweek by Zenger News.