The Biden administration is taking a more hands-on approach to the cryptocurrency business, which is extremely volatile, poorly understood, and barely regulated. Cryptocurrencies are digital currencies that are decentralised and protected by blockchain technology. In recent years, Bitcoin, ethereum, and other cryptocurrencies have become nearly as accessible as government-issued currency, yet the government provides little consumer protections for them.
The Securities and Exchange Commission (SEC), chaired by Gary Gensler, who taught a cryptocurrency class at MIT, is attempting to make the case that it can and will oversee whatever cryptocurrency investment schemes it determines fall within its jurisdiction. The bitcoin sector is in a regulatory grey area due to its relative newness and quick expansion. Crypto is classified as property by the Internal Revenue Service (IRS).Crypto is classified as a commodity by the Commodity Futures Trading Commission (CFTC). Furthermore, the SEC has stated that “depending on the facts and circumstances,” digital assets “may be securities.” A security, like stocks and bonds, is a financial instrument that may be traded and is governed by a number of rules designed to prevent fraud and protect investors.
The Securities and Exchange Commission appears to have determined that an impending offering from Coinbase, the largest cryptocurrency exchange in the United States, fulfils the SEC’s definition of a security. And it is demonstrating that it will step in and regulate it appropriately — and, by extension, more assertively regulate the rest of the crypto financial business.
People can buy and sell cryptocurrency on cryptocurrency exchanges. Coinbase is one of the largest cryptocurrency exchanges in the world, and it recently went public. It intended to create a programme called Lend, which would allow investors to lend USDC, a “stablecoin” whose value is connected to the value of the US dollar, to others. In exchange, lenders would earn 4% interest on the loan, which is far greater than the rate that traditional banks now offer on savings accounts. This may have made Coinbase Lend incredibly appealing to consumers who would not have otherwise risked investing in cryptocurrency.
Rules may be tightened in the near future as the Biden administration and Congress attempt to close the regulatory gaps that cryptocurrencies has created. Biden’s proposed 2022 budget contained crypto reporting requirements, the IRS is cracking down, and crypto regulations even formed a momentary stumbling block in the infrastructure bill’s approval. Concerns about how cryptocurrency might be used to aid criminal activities are adding to or possibly exacerbating this. Ransomware assaults frequently demand payment in bitcoin due to the difficulties in tracing those payments.
Cryptocurrency rules are on their way. The question today is whether the sluggish process of developing rules and enacting legislation can keep up with the constantly growing world of bitcoin.