How Crypto’s Regulatory Scene Might Evolve in 2022
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The story of crypto is one of a global asset and technology class, and it’s one we intend to cover as comprehensively as possible. Here’s what CoinDesk’s new regulatory team is watching for next year.
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The narrative
Hey folks. Happy holidays and congratulations on getting through 2020-lite! Next year promises to be fairly significant in terms of how the regulatory environment around digital assets will develop. To that end, CoinDesk’s brand new regulatory team is up and running and looking forward. I asked the team to share what they’re expecting.
Why it matters
CoinDesk is ramping up its efforts to cover the regulatory world’s intersection with the digital asset sector. To that end, we now have a global team composed of existing and new reporters dedicated to this very specific industry. Here’s what we’ll be watching for next year.
Breaking it down
Nikhilesh De (U.S.): The big issues I’m looking at in the U.S. are stablecoin regulation and the infrastructure bill. The stablecoin issue is most interesting to me – administration officials have said on multiple occasions that they want Congress to act on the President’s Working Group report. While the report suggests that the Financial Stability Oversight Council could draft regulations, even this interagency group is asking Congress to set the rules for stablecoin oversight in the U.S. The question is whether Congress will, or what those rules will look like.
The infrastructure bill’s impact is likewise going to draw my attention, less for the tax provision itself and more as a symbol for when the industry started really getting politically engaged. We’ve had lobbyists and policy groups for years now, but this past August’s fight over a provision defining a “broker” really felt like a shift in terms of how the industry views Washington, D.C. We’re already seeing a greater number of congressional candidates who have ties to the crypto industry. I imagine we’ll soon start hearing more about political action committees (PACs) or other efforts to lobby candidates and bolster pro-crypto politicians.
What I’m very curious about is where things land up on the actual regulatory side. Will the Securities and Exchange Commission or Commodity Futures Trading Commission take oversight of crypto spot markets? Will one of these agencies issue guidance for startups trying to launch in the U.S.? Or will 2022 be a repeat of 2021 and 2020 and 2019 and so on where we hear speeches and see enforcement actions but not much more.
On a personal note, thanks for sticking through the first year of this newsletter. More to come!
Sandali Handagama (EU): In 2022, we’re going to hear a lot more about the European Union’s (EU) proposed framework for regulating crypto assets as the European Council and Parliament start negotiating the rules. The Markets in Crypto Assets (MiCA) framework is broadly aimed at regulating virtual asset service providers and issuers. But there is an undeniable focus on policing the stablecoin sector, particularly ones that resemble Facebook (now Meta)’s proposed stablecoin libra (now diem).
EU regulators also proposed a regulatory sandbox for projects based on distributed ledger technology (DLT) in 2020 that’s currently awaiting parliamentary approval.
Meanwhile, the European Central Bank (ECB) is experimenting on a digital euro for retail use. A number of European countries including Switzerland and France have also been part of experiments involving a wholesale digital euro as the Bank of International Settlements (BIS) continues to expand its work on central bank digital currencies around the world.
Cheyenne Ligon (U.S.): On Feb. 2, 2022, Virgil Griffith – the Ethereum developer who was charged with violating U.S. sanctions law after giving a talk on cryptocurrencies in North Korea – will be sentenced by a New York judge. Griffith’s plea deal could see him serving between five and 6.5 years in federal prison.
Griffith’s case is just one of many such court cases I expect to see play out next year. While the majority of them will not be as high profile as Griffith’s, the explosion of growth in the crypto industry means lawmakers and enforcement agencies are increasingly turning their attention to crypto crime.
In 2022, I expect to see an uptick in the number of criminal probes of crypto companies, charges brought against individual crypto scammers, and – as the SEC and other regulators continue to regulate through enforcement – an increase in enforcement actions and civil penalties from the SEC and CFTC.
Lavender Au (APAC): With South Korea’s presidential election happening in March, we are unlikely to see much regulatory action soon. But a new administration taking power could mean that the industry may finally see a promotion bill and investors may see the controversial crypto tax bill amended.
Japan launched a decentralized finance (DeFi) study group this year and we may see their findings next year. The country will also introduce legislation on stablecoins and wallet providers who engage in stablecoin transactions.
In China, the overall attitude towards cryptocurrency is now set, and it’s not friendly. Some founders will leave the country and those who choose to remain will keep a low profile. Next year, we’ll see more enforcement, as local governments draw up more detailed regulation on crypto in their jurisdictions.
Across the border, we may see Hong Kong’s Securities and Futures Commission release specific legislation aimed at cryptocurrency late next year, insiders say.
Amitoj Singh (India): In the new year, CoinDesk will be closely watching the uncertain state of India’s cryptoverse. The focus would be to put a spotlight on the crypto bill which is yet to be tabled in parliament. As it is a work in progress, trying to align with the global regulatory framework, CoinDesk will be monitoring how the bill evolves.
Also on CoinDesk India’s priority list would be identifying what risks the government and its institutions are underlining around the crypto-verse and how it is framing the regulations to mitigate those risks.
One of the key focuses would be to investigate whether the regulatory framework would be a retrofit around the existing capital market framework and the institutions that monitor them.
Simultaneously, as the bill will only be a point of departure for India, our focus would also be on the following – discovering how India’s taxman claims seigniorage, the regulatory framework the advertisement council adopts, gauging the size of India’s dark web activity, and highlighting how India finds the balance between allowing for responsible advertising while also focusing on crypto literacy.
Changing of the guard
No more votes this year, happy holidays!
- (The Washington Post) The Post looks at the U.S. state of Wyoming and how it’s become a tax haven for oligarchs and other individuals.
- (The New York Times) Executives and developers are leaving major technology firms like Google and Apple to join crypto startups, the New York Times reports.
- (U.S. DOJ) The U.S. Department of Justice announced last week that it seized 3,879 bitcoin that a defendant allegedly seems to have used in an effort to hide funds embezzled from his company. What’s interesting to me is that the DOJ seems to be saying that law enforcement officials were able to recover bitcoin stored in a cold wallet. The actual complaint and supporting documents aren’t in the federal PACER system yet so I haven’t been able to read through but I would love to know more about this case – specifically, did the defendant just hand over the private key? Or is there more to this?
If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.
You can also join the group conversation on Telegram.
See ya’ll next week!
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