It might not be immediately apparent, but the US is inching closer toward a comprehensive regulatory framework for the crypto market. Despite one arm of the federal government – the Securities and Exchange Commission (SECs) – filing back to back lawsuits against crypto companies earlier this summer, the SEC’s court losses against Ripple paired with the introduction of two bills in the House Financial Services Committee show that momentum is moving forward.
And how couldn’t it? If the US were to stall out fully on regulating crypto in a way that was beneficial for all parties involved (industry, government, and consumer), it would mean missing out on all of the profits that come with a financial platform that is taking the world by storm.
Crypto is important enough to be a focus at the 2023 G20 summit, when India will be leading a discussion about global crypto coordination, cooperation, and information sharing. For the US to not be a part of that conversation moving forward would be completely uncharacteristic of the world’s economic leader.
It’s true that the US is lagging behind. The major economies of the world – including the EU, China, the UAE, and Japan – have introduced regulatory framework for cryptocurrency, ensuring that they have a place at the table when it comes to taking a piece of the crypto pie. At the same time, regulation enables new levels of security in operating, both for consumers and for businesses, and reduces the likelihood of criminal activity.
Clearly, there’s a lot at stake. And that’s one reason regulation is taking so long to be outlined by Congress: it has to be done right. If the regulatory framework is too restrictive, companies will continue to position themselves offshore rather than contending with too many closed avenues. It’s been happening already with the US’s delay in establishing clear guidelines contributing to the decline in the country’s share of the world’s blockchain developers from 42 to 29% between 2018-2022.
In other words, the US won’t want restrictive regulations in place because they’ll want to keep companies on-shore and encourage the industry to operate domestically as much as possible.
If the US rushes the regulation and it’s too loose, on the other hand, it could risk exposing companies and consumers to the risk of criminal activity. Bad actors in the crypto market sphere such as FTX have highlighted the potential for fraud in the industry, making Congress wary of being too light when it comes to outlining requirements for crypto operation.
Because of that, we can expect regulation from the US that is just right – not too restrictive to make companies want to leave, and not too loose to allow criminal activity. Producing that kind of fair and functional framework is clearly not something that happens overnight. With two new bills on the Congressional table and crypto dominating the conversation globally, however, it’s only going to be a matter of time before the US steps fully forward into the crypto market.