US financial regulators are signaling a potential cryptocurrency crash this summer
Does Finance Minister Janet Yellen and Securities and Exchange Commission Chairman Gary Gensler know what you did with cryptocurrency last summer? Before you shout that US regulators will not launch major crypto enforcement actions against the industry now, remind yourself of the last horror movie you saw where you were disbelieving that a teenager who unfortunately met an untimely death seemed to miss all the signals that danger was Close by.
Yesterday, US Treasury Secretary Wally Adeyemo cited Consensus 2022, one of the largest crypto conferences in the world, in his speech closing down the Russian darknet marketplace Hydra and the virtual currency exchange Garantex sanctioned to enable ransomware. According to Adeyemo, although cryptocurrency has not been used significantly to evade sanctions against Russia, the country is well known, “… as a hub for cybercriminals who use cryptocurrency to promote their crimes.”
US Deputy Prime Minister Wally Adeyemo speaks at a joint press conference with European … [+]
While suggesting that the Treasury Department hoped to partner with the cryptocurrency firms at the conference in Austin, Texas as a partnership, Adeyemo definitely insinuated a pattern in which he claimed that the industry is closing its eyes to illegal financial activities in the digital assets industry. “What stands out about these units is that their role in financing and facilitating criminal activity was well known, even before they were subject to sanctions. In too many cases, some investors and firms in the crypto ecosystem are willing to look the other way when jurisdictions like Russia offer a haven for criminals who misuse digital assets, Adeyemo said.
Adeyemo then described an interest in fostering a partnership between the Ministry of Finance and the crypto industry, which he also suggested could be improved through self-regulation. As a gesture in good faith, Adeyemo mentioned two main areas regarding crypto regulation that will come from the Ministry of Finance in the coming months. First, the Treasury will work to find a careful balance regarding the enforcement of the travel rule, a regulation in which both the sender and recipient of a digital asset over a certain dollar amount must share personally identifiable information with all intermediaries involved in the transfer.
Second, the Ministry of Finance would be focused on the unique risks associated with wallets that are not hosted. Adeyemo pointed out in his remarks: “Because non-hosted wallets are in practice just addresses on a blockchain, it can be difficult to determine who really owns and controls them – creating opportunities to abuse this increased anonymity.” Just as the Treasury needs to enforce the Bank Secrecy Act (BSA) through the requirements of the Itinerary, Adeyemo argued that financial institutions need to know who they are dealing with and doing business with to ensure they do not make payments to criminal or sanctioned entities that have a increased level of anonymity as a host-based wallet.
Of course, the opposite of a hostless wallet where you can store your Bitcoin
Crypto horror photo show?
Returning to the potential for a regulatory breakdown this summer, Adeyemo confirmed that efforts to push for a self-imposed wallet rule by Secretary Yellen that first emerged in January as part of the Treasury’s biannual agenda and zoning plan had actually reached the top of the priority list. cryptocurrency. This concern about how cryptocurrencies could be used to evade sanctions due to the Russia-Ukraine war has certainly accelerated the desire of the Treasury Department to ensure that all US citizens are aware that cryptocurrencies used in any way to help Russia avoid sanctions , is the same as using regular. American dollar.
Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), speaks during a house … [+]
However, this speech yesterday is not the first sign of a major US financial regulator signaling to the industry that regulation by enforcement can come very quickly to cryptocurrency. Chairman Gensler, who was recently referred to as the ‘number one criminal’ by the head of a DC crypto trading association in blocking the development of innovation with blockchain technology, has made no secret of his belief that cryptocurrency exchanges should enter his agency to register. as a stock exchange because it is likely that at least one, if not many, of the digital assets that are regularly traded are in fact securities.
While the industry responds again and again to how “unclear” the regulatory environment is due to the technological nature of cryptocurrencies and blockchain networks, Gensler has traveled far and wide and appeared in a number of media and on voice engagements, saying that in fact, either a digital Asset is a security is actually clear. Gensler has previously denied that the overwhelming number of blockchain tokens in the ecosystem does not match the level of staff he has at the SEC to provide effective enforcement when enforcing, which was one of the reasons he asked cryptocurrency exchanges to visit him and register.
However, the SEC announced on May 3 that it had doubled the size of cryptocurrencies and cyber devices. The press release stated: “By almost doubling the size of this key unit, the SEC will be better equipped to police offenses in the crypto markets …”. By adding another 20 employees to the enforcement team focusing on cryptocurrencies, it was clear that “spring training” for the summer would begin in earnest to get these new employees updated on how to identify any bad crypto players exploiting US investors. The release defined the scope of what this enforcement unit would focus on, saying: “The expanded crypto assets and cyber unit will leverage the agency’s expertise to ensure investors are protected in the crypto markets, focusing on investigating securities law violations related to: Exchange Offers; of cryptocurrencies; Crypto-asset lending and investment products; Decentralized finance (“DeFi”) platforms; Non-fungible tokens (“NFTs”); and Stablecoins. ”
Of course, the Terra Luna stablecoin debacle that sent the crypto market down just a few weeks ago and renewed calls for potential legislation has put US regulators in a very difficult position. No US regulator has been awarded stack coins at this time, highlighting a loophole in Congress that Congress needs to fix. However, the algorithmic stack coin that fell from grace, as well as the founder Do Kwon, highlighted the potential dangers to consumers that could be harmed financially as a result. Very often, a regulatory breakdown will follow from the regulator’s perception of the need to act, where even if there are laws – whether clear or not – that tell an industry what they can and cannot do, it is not until there is a strong level of enforcement that the actual behavior of the market changes.
In what may be another hint that there is an expectation that hard regulatory work is coming, Coin Center, a non-profit organization focusing on cryptocurrencies in DC, announced at Consensus 2022 that they had sued the US Treasury Department for “… so-called 6050I surcharge, and it will require individuals and businesses receiving $ 10,000 or more in crypto to report to the authorities, not only the name of who sent them the money, but also that person’s date of birth and social security number. ” This change was part of the legislation on crypto-tax reporting that became the Infrastructure Investment and Jobs Act (HR 3684) passed last summer, and the intense battle on Capitol Hill last summer undoubtedly increased efforts in crypto-lobbying in DC to new levels. as many were surprised at the level of grassroots setbacks by cryptocurrency advocates who called and wrote to their representatives to complain about the bill.
The Coin Center explains this change, “… will require individuals and businesses that receive $ 10,000 or more in crypto to report to the government, not just the name of who sent them the money, but that person’s date of birth and social security number as well.” The Coin Center claims that this is unconstitutional in part because, “forcing ordinary people to gather very intrusive information about other ordinary people, and reporting it to the government without a guarantee, is unconstitutional during the fourth amendment …”.
Whether by chance or not, the Coin Center filed a lawsuit to provide personal information to the US government was related to the revival of the “unhosted wallet” regulation by the Ministry of Finance, it seems that the first meeting started yesterday about what rights individuals who have digital currencies have. At least that seems to be the start of a great summer movie.
