Interview, Podcast
What’s next for crypto regulations?
- Accelerated regulatory legislation is anticipated following Senate Agriculture hearings, with stablecoin clarity from the Federal Reserve and new laws expected within the next year.
- A two-tier market structure is projected where offshore entities like Tether operate internationally while onshore markets adhere to stricter U.S. compliance for institutional adoption.
- The SEC is expected to revise its custody rule to address the classification of digital assets, a process noted to have taken approximately 10 years.
- Regulatory constraints on ICOs and stablecoins with unstable features will be enforced in the near term to mitigate counterparty and credit risks.
- The SEC and CFTC are expected to collaborate on common standards for the crypto spot market, potentially offering temporary protection against venue shutdowns during classification resolution.
- While comprehensive bills creating a new regulator face a remote probability of passage, targeted legislation integrating new technology into existing laws holds a significant chance of success.
- A joint self-regulatory organization may be established under SEC and CFTC jurisdiction, utilizing precedents from FINRA and the National Futures Association to formulate industry rules.
- Crypto frameworks similar to those applied to swaps under the G20 could be adapted, potentially restricting access to platforms located in non-compliant jurisdictions.
- Blockchain technology is expected to achieve interoperability with the real world, specifically transforming international payment systems and supply chains to correct correspondent banking inefficiencies.
- A future financial crisis is anticipated to serve as a necessary catalyst to resolve the tension between private stablecoins and the government's monopoly on cash production.
- Without regulatory clarity, it is predicted that fiat and digital currencies would likely "bleed into one," whereas stablecoins may never trade dominantly in the U.S. due to an inability to cross the regulatory threshold.
- The view that digital assets should remain completely unregulated is characterized as misguided, with expectations that such an approach would enable untoward activities and unchecked innovation.
- Banks are expected to remain excluded from digital asset custody unless SEC SAB 121 guidance changes, as current balance sheet capital requirements remain prohibitive.
- Persistent skepticism among economists and scholars regarding the long-term existence of digital assets as an asset class is expected to contribute to continued regulatory delays.