Just when you thought some of those politicians in DC were done with their attempts at regulating crypto, they come from left of field with a raft of measures and proposals.
One of these was a provision that was snuck into a House bill (the COMPETES Act). The Act is legislation that is aimed at increasing economic competitiveness with China. However, it has now served as a trojan horse for this seemingly unrelated and toxic provision. More specifically, the provision would give the treasury arbitrary powers to block all US financial institutions from interacting with a crypto exchange, jurisdiction that has crypto exchanges, crypto exchanges by a non-US miner or even transactions coming from non-US custodial wallets.
This provision aims to greatly expand existing laws that the treasury already has to impose restrictions on transactions like this. The only difference is that those laws have to come with consultation of the Fed and numerous other federal regulators before doing so. Moreover, there is a time limit on these restrictions and they could lift it in 120 days.
So, quite simply, this provision will give Janet Yellen’s Treasury department arbitrary powers to impose on exchanges when it sees fit. Impositions that do not need to be discussed with anyone else and can last indefinitely. It should also be noted that this provision has been inserted by the same member who tried to insert a similar provision into the National Defense Authorization Act last year. This was an essential bill that kept the US military funded which thankfully did not pass with the provision as it was struck just in time.
It’s pretty alarming to me when these politicians jam unrelated provisions into must-pass bills. Let’s also not forget that this happened last year with the infrastructure bill. Indeed, if it wasn’t for the efforts of the blockchain lobby, many more of these laws would have made their way through congress. It also makes me wonder how many laws are being passed on a regular basis without anyone in the voting public actually knowing about it until the enforcement hits them in the face.
Then, to add to the rumblings on Capitol hill, the White House also threw some FUD our way with news of a potential Executive Order by Biden on cryptocurrencies…
The exact details of the Executive Order are yet to be announced, but according to sources, it would be issued in a national security memorandum. It would assign some government entities to study crypto, stablecoins and NFTs with the goal of developing a workable regulatory framework. The fact that this EO will be placed in the context of “national security” goes to show that the fear stems from the cross-border payments for potential illicit activity. It’s therefore no surprise that this is coming at about the same time as the aforementioned provision which gives Treasury control of these cross border payments. Of course, it’s a lot easier to convince people of the need for regulation and control when it is done on the grounds of “National Security”. Fear sells and even though illicit activity plays a minuscule role in overall activity, it’s the narrative that is important.
That aside, the COMPETES Act has a long way to go and my hope is that the provision will be removed when it heads to the Senate. Indeed, a competing lawmaker has already introduced an amendment that simply eliminates the provision altogether. As it relates to Biden’s incoming EO, I will be keeping my eyes peeled and my ears to the ground.
Yet, as I made clear in my video today, the mere fact that these regulations have made their way into the halls of congress and beyond is because crypto has become such a transformative force. We can only hope that there are more politicians that are on our side who are able to stand guard at the gates and defend the progress we have made.