The US has tried to categorize cryptocurrency properly for years to help the increasing number of investors fund their portfolios. But figuring out where to group digital assets was a challenge, as financial bodies took their time to decide if crypto could be classified as a security, a stock, or a commodity. Legally speaking, it is considered that all cryptocurrencies are securities, but Bitcoin will be regulated as a commodity because it provides value from its development and isn’t ruled by a central entity.
Bitcoin’s decentralization feature is supposed to help the US government build a benchmark for regulation to face the raised demand for cryptocurrencies. However, this only applies to Bitcoin because other digital assets, like Ethereum or Ripple, are more complex to bring down to a simple financial investment.
The US Securities and Exchange Commission (SEC) worked on expanding the view on cryptocurrency in collaboration with the Agriculture Committee and the Financial Services Committee.
The US Passed 4 Institutional Bills in an Attempt to Design a Crypto Regulatory Framework.
The American crypto industry was constantly surrounded by doubt and misunderstanding regarding legally operating with these assets. The lack of regulation also reduced the number of investors and interested entrepreneurs trying out Bitcoin or Ethereum. But with these new four crypto bills circulating in America’s law framework, the country is set for progress.
These bills include the Financial Innovation and Technology for the 21st Century Act, which will deal with the issuance of cryptocurrencies at the SEC and CFTC. At the same time, FIT will provide a thorough foundation for trading digital assets within the US.
Next, the Blockchain Regulatory Certainty Act will better control how blockchain developers and providers handle consumer funds. This act is supposed to ensure that blockchains will undergo different regulations than cryptocurrencies and will not be conserved as money transmitters.
Following, the Clarity for Payment Stablecoins Act is set to approve and regulate stablecoin issuers and provide more clarity on their usage. Finally, the Keep Your Coins Act supports the self-custody of crypto.
The Bills Cover Some of the Key Points of Cryptocurrency.
While the crypto sector is so vast, the US Committee achieved a base formation to encapsulate the start of understanding this industry more thoroughly. Due to its decentralization feature, crypto and blockchain weren’t intended to be put in place by the government, but it seems like they’ll be challenging to work with in the lack of these regulations.
For example, the act on cryptocurrency issuance will set core operating principles on regulation, authority, and legal framework. By providing more clarity into this technological development, crypto developers and the entire market will benefit from better settling rules.
At the same time, the US Committee wants to help crypto holders benefit from self-hosted wallets, which an increasing number of users are approaching, as opposed to trusting third parties to keep their private keys safely and with no other interest involved. Although self-custody can be subject to human errors in securing assets, this eliminates the risk of being targeted by economic collapses of crypto exchanges and holders.
Will Bitcoin be Regulated in the US?
Bitcoin maintained a certain level of trust and security over the years, placing it at the top of the competition. This led governments and countries to consider making it legal tender and adopt it worldwide, an event that would enter history. Bitcoin would help anyone keep their funds in a safe place and invest frequently to make passive income, which is a great help during difficult financial times.
However, some drawbacks to using cryptocurrency might not support the US’s views on regulation. First, Bitcoin is highly volatile due to its limited supply. Although experts believe that volatility will decrease over time when more people start investing in it, and the demand will stabilize, the truth is that more factors influence a coin’s volatility.
Moreover, we don’t know yet how Bitcoin will develop, what will happen after it reaches its maximum coin limit, and if Ethereum or other digital assets overthrow it. This lack of certainty over its future contributes to more suspicion of the high risk of this movement.
Still, the Fundamentals of Bitcoin’s Protocol Contradict the Regulations.
Bitcoin was made to be decentralized forever and provide people with a way of making money without the involvement of governments or third parties. Bitcoin is indeed taxable now, along with many other cryptocurrencies, but this step hasn’t solved much in regard to providing a legal framework.
That’s because Bitcoin lacks a central server that authorities can’t impact, so its servers cannot be definitively shut down despite effortless regulations. While they can try to control the way it is used, the truth is that Bitcoin can be leveraged in numerous ways without the government’s
implication.
Despite this concern, there are ways to provide a standard for security in using cryptocurrencies by businesses, such as publishing their balance sheets publicly or becoming liable for customer funds. The aim for these companies should be to increase trust and consumer protection without affecting cryptocurrency development.
Bitcoin Requires Innovative Thinking.
Bitcoin is something the world isn’t prepared for yet, and that’s because it doesn’t have any traditional patterns on which governments can base their efforts. The decentralization movement is spreading at a rapid speed, and institutions can’t keep up with this level of economic alteration.
Therefore, properly using Bitcoin, similar cryptocurrencies, and blockchain technology requires a new way of thinking and approach.
While the US has the most developed Bitcoin market, other areas, such as Japan and South Korea, might also work on improving the sector so these governments can unite their efforts to find the people who can deal with the technology of the future.
Final Considerations
The US House Committee worked to provide a proper regulatory framework on cryptocurrency for a while and has now validated four crypto bills that discuss issuance, blockchain, stablecoins, and the holding of assets. This is a step forward to adopting Bitcoin and expanding their opportunities in using digital assets.
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