[ad_1]
American blockchain and crypto innovators are fighting to keep their businesses in the United States. Too often, they wonder what sweeping new federal regulations will be the last straw that will force them to move their businesses overseas to countries like Europe or Singapore, where blockchain innovation is embraced through streamlined regulation. . This begs the question: What is the role of Congress in making the United States more welcoming to blockchain and crypto entrepreneurs?
For America’s blockchain pioneers, new regulations from the Financial Action Task Force (FATF), an international standards body, could be the last straw. In March, the FATF released a proposed guidance that, if codified in the United States, would include a wide range of non-custodial blockchain entities as part of money transmission. Many entities in the blockchain space that do not facilitate financial transactions, but are simply developing blockchain or crypto technology, should obtain a money transmission license in each state where they have clients in order to operate nationally, which means the 53 states and territories that require a money transfer license.
Unfortunately, the Treasury Department, which heads the US delegation to the FATF, has contributed to this guidance proposal. This leaves the blockchain industry wondering if FinCEN, a subsidiary of the Treasury, will start cracking down on non-depository entities, despite its current and pragmatic approach of excluding non-depository entities from the money transmission system.
The guidelines proposed by the FATF are designed to target decentralized finance (DeFi), which consists of performing peer-to-peer transactions on a blockchain without a third-party intermediary such as a bank. This blockchain transaction sector dramatically expands financial inclusion by providing consumers with the ability to borrow, lend and transact with each other directly, in real time, at very low cost. DeFi happens entirely on a blockchain, so these transactions and agreements are transparent and verifiable, requiring no trust, only smart contracts. When there is no third party such as a bank facilitating a transaction, however, who transmits the money? This question has prompted the FATF to cast a wide net around blockchain developers and service providers who are building DeFi infrastructure. From the perspective of the FATF, if there is no third-party intermediary, technology developers should be responsible for maintaining creditworthiness.
Transactions occurring on a blockchain, however, occur in real time, which means that when it comes to DeFi, there is no need for creditworthiness as funds go directly from person A to person C, therefore, to say. There is no person B acting as an intermediary, and the consumption funds are never in limbo. DeFi is only one facet of financial services facilitated by blockchain. Outside of DeFi, there are certainly entities such as centralized crypto exchanges and hosted wallet providers that hold consumer funds and these custodian entities need to be licensed to transfer money, rightly. Separately and distinctly, however, many of these tech developers (especially DeFi infrastructure developers) are only building blockchain technology. They do not hold consumer funds or facilitate transactions, they are non-custodial entities.
The rule proposed by the FATF would force non-depository technology developers to navigate the complex and expensive money transmission licensing regime: a regime so cumbersome that these innovators and developers would have no choice but to innovate and to expand outside of the United States.
The FATF is expected to meet this week to consider public comments on its proposed directions, raising the question of Congress’ role in blockchain politics. While my suggested remedy for this guidance proposal is the Blockchain Regulatory Certainty Act, legislation designed to exempt a non-depository entity from the requirement to register as a money transmitter, the bipartisan attention of Congress in this area is clearly needed to serve as a control to the executive in the event of overshoot. as it arises.
Aside from the FATF, government agencies under previous administrations have enacted cryptocurrency and blockchain regulations that reflect a sincere misunderstanding of these technologies and their use cases. Going forward, Congress must continue to assert itself as a check on executive excesses in order to protect our innovators at home.
Tom EmmerThomas (Tom) Earl EmmerHouse Democrats’ campaign arm raises nearly one million in May Hillicon Valley: Senate unanimously confirms Chris Inglis as White House’s first cyber tsar | The scrutiny of Microsoft’s surveillance technology | Senators unveil bill to crack down on cybercriminals. The Republican House campaign arm has announced that it will start soliciting cryptocurrency donations. PLUS represents Minnesota’s 6th District.
[ad_2]
picture credit