The White House’s first crypto framework and missed opportunities — Law Decoded, 12-19 September

by Arthur · September 19, 2022

At the end of last week, the federal agencies presented the results of their six-month work on the main directions for the regulation of digital assets in the United States. The resulting first-ever crypto framework, published on the White House website, may not contain many surprises or exact details, but as part of President Joe Biden’s executive order, it will undoubtedly influence policy decisions to come.

Perhaps the most important part of the framework is dedicated to central bank digital currencies (CBDCs). It revealed that the administration has already developed policy goals for a US CBDC system, but further research into the possible technological basis for this system is needed. Still, the intention seems quite serious as the Treasury Department will lead an interagency task force with the participation of the Federal Reserve, the National Economic Council, the National Security Council and the Office of Science and Technology Policy.

The industry did not take the document well, as the politicians’ focus on safety and enforcement is all too visible. Kristin Smith, CEO of the US-based Blockchain Association, called it “a missed opportunity to cement US crypto leadership”, highlighting its heavy emphasis on risks, not opportunities, and the lack of substantive recommendations on promoting the crypto industry. Sheila Warren of the Crypto Council for Innovation told Cointelegraph that the policy recommendations appeared to be based on an “outdated and unbalanced understanding” of crypto, which could leave the details to be decided by other lawmakers or the next administration.

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The merger and its regulatory consequences

Ethereum’s upgrade to proof-of-stake (PoS) may have put the cryptocurrency back in the crosshairs of the Securities and Exchange Commission. SEC Chairman Gary Gensler reportedly said that cryptocurrencies and intermediaries that allow holders to “bet” their crypto can define it as a security under the Howey test. Gensler went on to say that intermediaries who offer betting services to their clients “look very similar – with some changes in the labeling – to lending.” The SEC has previously said that it did not view Ether (ETH) as a security, and both the Commodity Futures Trading Commission (CFTC) and the SEC agree that it functioned more like a commodity.

18 potential design forms for the US CBDC

The Office of Science and Technology Policy provided a report analyzing the design choices for 18 central banks’ digital currency systems for possible implementation in the United States. The technical analysis of the 18 CBDC design choices was done across six broad categories: participants, governance, security, transactions, data and adjustments. The OSTP report helped policymakers determine the ideal US CBDC system, and highlighted the implications of including third parties in the two design choices under the “participants” category – transport layer and interoperability. For governance, the report weighed various factors related to permissions, access level, identity protection and remediation.

Thailand prepares to ban crypto lending

The Securities and Exchange Commission (SEC) of Thailand is preparing to take radical measures in the wake of the crash of crypto-lending platforms experienced in the summer of 2022. The Thai SEC plans to ban crypto-platforms from offering or supporting digital asset custody services. The planned ban covers several main points. It will prohibit operators from taking a deposit of digital assets with a promise to pay returns to depositors – even if the returns come not from the increasing value of the assets, but from the campaign budget. Advertising for lending and custody services would also be prohibited.