While we’re on the topic of enforcement, the U.S. government is changing its approach to all-out crypto enforcement. Now, it’s taking a more nuanced, pragmatic approach to regulating blockchain technology. This move shows good bipartisan intent to support both compliance and innovation in the growing digital asset space. If enacted, this new holistic approach to crypto regulation could mark a watershed moment for innovation in the payments space. For one, experts cautioned against seeing this transition as an excuse to pump the brakes on compliance efforts. The U.S. government is preparing for increased scrutiny of transactions related to criminal activity.
Evolving Regulatory Landscape
The current U.S. government approach to cryptocurrency regulations seems to be changing. Most importantly, they are starting to treat these digital assets as an indelible pillar of the financial ecosystem, rather than a flash in the pan. Dan Boyle of Boies Schiller warns that while there has been a welcome change in approach, crypto companies need to remain on their toes. He adds that the government is bracing for heightened scrutiny of transactions involving Venezuela, Iran, or identified narco-traffickers.
"There’s certainly a change in how the administration views the digital assets industry." - Dan Boyle
Criminal enterprises should still be able to take advantage of the speed and flexibility of these stablecoins, particularly those issued outside of U.S. regulatory jurisdiction. A comprehensive U.S. framework for regulating stablecoins, if passed, would be the first of its kind, addressing a digital asset class frequently used for illicit activities but increasingly adopted by mainstream financial institutions.
"Even if stablecoins are the preferred medium for a lot of criminal activity, creating a regulated environment where these companies can operate in conjunction with law enforcement is probably a positive." - Dan Boyle
Compliance and Innovation
Boyle expects to see a split within the crypto ecosystem as larger exchanges and stablecoin issuers level up their compliance standards. This split will inevitably pit companies that want to adhere to the evolving regulatory landscape against others that are determined to evade it.
"You’re going to see a divide between some companies which become compliant and others that want to stay outside of it." - Dan Boyle
He further emphasizes that businesses need to be aware and proactive about regulation outside our borders, too.
"You’re going to have states and foreign regulators that still care about things like foreign bribery and kleptocracy. Those haven’t gone away." - Dan Boyle
"And there’s a lane now for companies who want to do it right." - Dan Boyle
Defining Digital Assets
The future of crypto regulation may hinge on a fundamental question: defining what digital assets actually are. Boyle concurred that figuring out what exactly a digital asset is an important first step to regulating them. The absence of a clear, universally understood definition has always been and remains the biggest hurdle.
Webster explained the uncertainty around the term, as asking it to ten different people would result in ten different answers.
"even now, whatever definition we might come up with today, that may be obsolete in three to six months … Perhaps having more participants in the area is going to help us all understand what the scope of the category should be." - Dan Boyle
Boyle’s top takeaway for companies steering through the challenging crypto waters is to stay cautious but not tune out.
Boyle advises companies navigating the uncertain crypto landscape to remain vigilant but not disengage.
