As 2022 begins, America is approaching the one-year anniversary of Joe Biden’s presidency. After the ambitious start of his mandate, The past few months have seen serious upheaval surrounding the overall health of the United States economy, the management of the COVID-19 pandemic administration, and the tense debate surrounding the Biden’s magnum opus: the Build Back Better Infrastructure Legislative Plan, $ 1.7 Billion.
But while the Democrats’ ability to maintain undivided power after the 2022 midterm elections may raise doubts, the party’s prevailing view on cryptocurrencies has become more established than ever. The acting president’s party will set the tone for the regulatory discussion for at least three more years, so it is necessary to thoroughly examine the fundamental premises and possible directions of his emerging stance on cryptocurrencies..
The narrative framework
The path that mainstream Democratic thinking on cryptocurrencies has traveled over the past three years is perfectly captured in an anecdote featuring two crypto-related public statements made by one of the Clintons. One is that of the 42nd president of the United States, Bill clinton, who was then 72 years old, who said at Ripple’s Swell Conference in October 2018 that the “permutations and possibilities” of the blockchain were “staggeringly large”.
Three years later, speaking at the Bloomberg New Economy Forum in Singapore, Bill’s wife and former presidential candidate Hillary clinton, although he called cryptocurrencies an “interesting” technology, warned of their power to undermine the US dollar and destabilize nations, maybe start small and then go much further “.
This surprising difference of opinion in the power couple reflects the recent evolution of the Democratic party itself., which has moved from the business, technology and finance “third way” centrism of its generation of the 1990s to a new statism with a strong emphasis on redistributive justice and big government projects. By today’s standards, the former first lady sounded quite balanced compared to her party partner, Senator Elizabeth Warren, who has lashed out at the crypto market following the outbreak of volatility in early September:
Proponents say that cryptocurrency markets are all about financial inclusion, but the most economically vulnerable people are the ones most likely to have to withdraw their money the fastest when the market falls. […] High and unpredictable commissions can make cryptocurrency trading really dangerous for people who are not rich.
Warren has criticized cryptocurrencies numerous times, qualifying them as “fourth category alternative to real currency” that are “inadequate as a means of exchange”; a “lousy investment”, which “has no protection for the consumer”; and a tool that facilitates many illegal activities.
Beyond Senator Warren
The negative sentiment is largely shared by Senator Sherrod Brown, which is all the more disturbing given his status as chairman of the US Senate Committee on Banking, Housing and Urban Affairs. Brown’s opening remarks at Congressional hearings have never been crypto-friendly. Its general spirit can be summed up in the introduction that opened the July hearing, entitled “Cryptocurrencies: What are they good for?”
“All of these currencies have one thing in common: they are not real dollars, they are not backed by the full faith and credit of the United States. […] And that means they all put Americans’ hard-earned money at risk. “
Brown blamed the “cottage industry of decentralized financial schemes” for an attempt to create “a parallel financial system without rules, without supervision and without limits”, calling it a “murky and diffuse network of rare money online”, without anything democratic or transparent. The legislator repeatedly rejected the idea that cryptocurrencies could be an alternative to traditional money, most recently in a congressional hearing in December:
Stablecoins and cryptocurrency markets are not really an alternative to our banking system. […] They are a mirror of the same broken system, with even less responsibility and no rules.
However, not everything is bad. A figure representing a more moderate, if not pragmatic, approach to cryptocurrencies –Congresswoman Maxime Waters – would also play an important role in any future industry outcomes. As chair of the House Financial Services Committee, she launched the Democratic Members’ Task Force on Digital Assets with the mission of ensuring responsible innovation in the cryptocurrency and digital assets space and “meeting with the major regulators, advocates and other experts on how these novel products and services are reshaping our financial system. “
Sen. Waters has publicly acknowledged that “Americans are making more and more financial decisions using digital assets every day,” stating that its Committee will explore “the promise of digital assets to provide faster payments, instant settlements and lower transaction fees for remittances”.
What is this all about?
The good news is that underneath the formidable public speaking is a keyword: regulation. It’s clear by now that an all-out war on cryptocurrencies a la China is not an option in the US. What fuels the heated activity by congressional committees and federal agencies in recent months is a clear intention of the Democratic establishment to order the rules of the game before the next presidential election..
Part of this effort by the Biden administration is the launch of the President’s Task Force on Financial Markets., a team of superheroes made up of executives from the SEC, CFTC, OCC, FDIC and the Federal Reserve System, with the secretary of the Treasury Department leading the group.
So far, the key product of the Task Force is a 26-page report on stablecoins., which advises Congress to designate some stablecoin-related activities – such as payments, clearing, and settlement – as “systemically important” (which would inevitably lead to stricter oversight) and to limit the issuance of stablecoins to insured depository institutions. , that is, the banks.
As in the days before Biden, the main problem lies in the basic classification of digital assets. The PWG report did not propose a novel interpretation or prioritize a single regulatory body, thus perpetuating a situation where a variety of regulators oversee different types of cryptocurrency-related activities.
In October, Rostin Behnam, chairman of the Commodity Futures Trading Commission and a member of the Democratic Party, claimed that up to 60% of digital assets can be classified as commodities, which is equivalent to proposing that the agency become the main regulator of cryptocurrencies in the United States. He also said his agency, as well as the Securities and Exchange Commission, would likely need “a regulatory structure for both securities and commodities.” How exactly that would help the current patchwork of approaches to regulation is still a mystery.
The Democratic Cause
There are several reasons to believe that the largely heralding activity of 2021 will be followed by some real action in the following year.. The first is the general idealistic mentality of the American Democrats. For example, the drive to aggressively regulate big tech is part of this mindset.
As President Barack Obama and some regulators worked with Google and Twitter to facilitate the growth of Internet companies, the Joe Biden government came to power amid the wave of popular anxiety over international cyberattacks, personal data leaks , the mismanagement of the Meta crisis, and the widespread influence on the political process accumulated by the tech goliaths.
While Meta and Google have long battled federal and state regulators in court over allegations of anti-competitive conduct, Biden’s team also pledged to hold tech companies to account for the toxic discourse they harbor and to strengthen surveillance of anti-competitive practices..
But nevertheless, in 2021 we have not seen any significant political step in this direction. Neither of the two main legislative proposals – Amy Klobuchar’s bill, which would prohibit big tech platforms from favoring their own products and services, and a House Democrats’ bill that seeks to remove some protections granted to technology companies by Section 230 of the Communications Decency Act — has become law.
The second reason behind the Democrats’ rush to put cryptocurrencies within the regulatory perimeter is pragmatic: The Biden administration and its allies on Capitol Hill need money. Biden’s first term agenda relies heavily on ambitious Roosveltian infrastructure projects. While the $ 1.2 trillion Infrastructure Investment and Jobs Act garnered bipartisan support and became law on November 5, the Build Back Better Act, now hanging by a thread after Democratic Senator Joe Manchin announced his opposition to the current project, it would cost almost 2 billion dollars.
By some estimates, should it make it to the president’s desk, the spending program would increase the deficit by $ 360 billion over 10 years, making it urgent to collect more tax revenue. This is what makes the thriving crypto industry a major battleground for Democrats, who see a chance to reap some money from it. and the urgency of avoiding tax evasion through digital tools.
What comes next?
There is no doubt that the Biden government will continue with a strict regulatory agenda in 2022. We’ll see more hearings in Congress next year, but the most important negotiations will take place behind closed doors, where Democrats will ultimately have to decide whether the SEC, CFTC, or any other body should dominate oversight of cryptocurrencies. Despite Sharrod Brown’s recent comments “with or without Congress” he also it’s hard to believe that Republicans will let their opponents decide the fate of the industry for themselves.
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