The smart way to think about crypto regulation – InsideSources

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In the generally boring process of pushing another massive infrastructure bill through Congress last month, a heated debate has erupted over the future of cryptocurrencies and digital assets.

The Senate bill contained broad language to ensure tax and regulatory compliance on all cryptocurrency transactions, regardless of their origin, as a revenue generator.

However, traditional financial transactions cannot be compared to the complex crypto-algorithmic world of mining, staking, rewards, and smart contracts. It’s easy to see why many digital currency enthusiasts have become alarmed.

In a hackneyed way that no one saw coming, the whole future of the crypto industry, including projects like Bitcoin, Ethereum, non-fungible tokens, and blockchains, has been put in jeopardy.

Amendments to adapt the wording or to delete it altogether have been proposed. But by Senate rules, even a single voice of opposition could kill them. Or, in this case, the desire to spend $ 50 billion more on defense spending killed them. And that was it.

To be clear, America deserves a fair and substantial debate over the nascent crypto space. If we are to consider regulation, we need testimonials from innovators, entrepreneurs, advocates and skeptics. Instead, we’ve seen a marathon of sticking, with proposals and taxes stuck without even a thought for millions of crypto consumers.

More shockingly, however, the rules actually have very little to do with the innovative nature of the crypto space and everything to do with how much money lawmakers thought they could extract from the industry and from token holders. This was laid bare in the Biden administration’s fact sheet on the infrastructure bill, which claimed the $ 1 trillion plan would be funded by strengthening law enforcement in the area. of cryptocurrencies.

Despite the inelegance of these proposals, there are smart and user-friendly policies we can adopt on cryptocurrencies and crypto projects.

For starters, federal agencies can focus on the causes of fraud and abuse. With every successful token or crypto coin, there are dozens of scam sites or exchanges that scam users or siphon off any digital assets they can before they shut down, known in the industry as the carpet draw. .

By focusing resources on dishonest brokers and fraudulent schemes, the government could save millions of consumers from wasting their hard-earned money, while distinguishing between the bad and the good. This would help build confidence in the system as a whole.

Second, any crypto regulation should make technology neutrality a core tenet, which means the government should not declare winners or losers. Just as the vinyl record was replaced by the CD-ROM and then the MP3, governments should not choose a preferred technology and instead let innovation and consumer choice make that decision.

The crypto industry, less than a decade old, welcomes intense competition that changes rapidly every day. Whether through algorithmic mining (Proof of Work) or block validation (Proof of Stake), users and entrepreneurs test and adapt best practices. If the government approves one method or bans another, because of environmental or technical concerns, it risks losing out and stifling innovation.

Third, regulators should not classify cryptocurrencies solely as taxable investments, but rather as technological tools that empower consumers and foster innovation. A unique crypto asset class, separate from traditional securities, would help users benefit from the decentralization and encryption these projects offer while ensuring reasonable taxation of earnings.

Finally, regulators must provide legal certainty to the budding crypto industry or risk pushing all crypto activity into the black market, where no rules or regulations will be followed. The disastrous effects of the War on Drugs on cannabis users or victims of the prohibition of the 1920s underscore this point.

Clear guidelines that allow crypto companies to open bank accounts, purchase insurance, and legally compensate workers will protect innovation, continue to create value for entrepreneurs and consumers, and allow businesses to pay taxes and follow rules. It will be vital.

Lawmakers should view the crypto industry as a friend rather than an enemy. With more opportunities will come more investment, more jobs and more innovation and that means everyone will be better off.

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