By Evan Spicer
Director of Cryptocurrency Investigations
It’s the moment crypto skeptics were waiting for – although it happened over a period of weeks and months rather than in a single moment. However, when bitcoin, after months of decline, dipped below a critical level of $20,000 in June, people who forecasted a bitcoin bubble burst may have felt vindicated.
With the decline of bitcoin’s price to levels that had not been seen in several years, and its 2021 high of $68,000 a distant memory, other cryptocurrencies and crypto exchanges stumbled and fell. Stablecoin USD lost virtually all of its value and crypto lender Celsius, which boasted “banks are not your friends” and promised clients a whopping 18% interest rate on deposits, has had to freeze funds under rumors of insolvency and the threat of cease and desist orders.
Does this spell the end of cryptocurrencies? Apparently not. Although attempting to buy bitcoin on a decline is still as treacherous as trying to catch a falling knife, a bipartisan cryptocurrency regulation bill proposed in the U.S. Senate may create a redemptive path for cryptocurrency – one with steps toward regulation.
Crypto Regulation: Savior or Destroyer?
It wasn’t too long ago that crypto fans boasted of a financial landscape free of regulation and speculated that any regulation of bitcoin, Ethereum and other crypto assets would destroy the crypto culture.
A year on, the proposed legislation in the U.S. Senate implies that regulation may actually be a savior, rather than a destroyer of cryptocurrencies. Who would take a gamble on an asset that may lose two thirds of its value in just six months? Who would open an account with a crypto lender only to have it frozen during a market crash with no indication of when it will open again?
Comparisons have been drawn between the current crypto environment in the wake of the crypto crash with the aftermath of the Great Depression in the U.S. in 1929, when citizens lost millions of dollars in savings as banks collapsed. This led to the establishment of the Federal Deposit Insurance Corporation (FDIC) to insure all deposits. What is needed, some argue, is more regulation and cryptocurrencies, just as the U.S. increased regulation of the banks during the Great Depression, and financial products associated with them will be safe.
The U.S. Senate Mulls Crypto Legislation
Although proposed legislation raises the question of the ability to skirt past regulators on the anonymous blockchain and how to establish the value of crypto assets, governments around the world are demonstrating that the will to at least attempt crypto regulation is strong.
The Responsible Financial Regulation Act was introduced by Senators Kirsten Gillbrand of New York and Cynthia Lummis of Wyoming and, if passed, would establish an advisory committee on regulating cryptocurrency and would give the Commodity Futures Trading Commission (CFTC) the authority to regulate them.
The bill identifies ambiguities that, until now, were an impediment to regulation. For instance, the disagreement over whether crypto assets should be considered securities or commodities is one of the quandaries that has impeded regulation up to the present.
Although all involved admit that the bill still needs some fine tuning, Alma Angotti, a partner in Guidehouse’s financial consulting segment, told TechTarget, “The bill does a very good job. It’s very thorough. They tackle a lot of uncertainty issues that were a problem. The regulation may not be perfect, but investors and cryptocurrency companies will know how to operate if the bill becomes a law. They’ve been working on this for a long time and they seem to want to get this right.”
With greater willingness to regulate cryptocurrencies, it’s clear that governments around the world are concerned about making the blockchain safer for consumers. Before approaching regulators, government agencies or law enforcement, make sure you can present your case effectively. Our experts will investigate your claim and give you the tools to make your case successful.
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