What types of cryptocurrencies may be banned or regulated in the United States if regulation comes?
In the past few weeks, there have been many reports of senior US officials calling for regulation and classification of cryptocurrencies as securities. Although all these news seem to be completely negative, it is unlikely that the United States will completely ban encryption.
The United States is known for enacting strict laws and regulations to protect investors. For the past 13 years, cryptocurrencies have been operating outside of these guidelines, and anyone can buy, sell or exchange without any regulatory issues . Unfortunately, this seems to be changing because senior U.S. financial officials such as SEC Chairman Gary Gensler, Senator Elizabeth Warren, and Congressman Brad Sherman have been calling for regulation of the cryptocurrency sector. .
When regulators first promoted the supervision of the cryptocurrency field, they have been focusing on specific areas. The focus is on managing unregistered securities that are freely traded in the cryptocurrency market. According to the definition of the United States, a security is an asset, which is “investment of funds in a common enterprise, and a reasonable expectation of profit from the efforts of others.” If an asset meets these four criteria, the government classifies it as a security, which means it can only be traded on registered exchanges such as the Nasdaq and the New York Stock Exchange, and anyone who holds the asset Must pass strict KYC/ AML procedures before exchange.
It is conceivable that any cryptocurrency declared as a security could be destroyed and forgotten because they will be delisted from all major cryptocurrency exchanges. At present, XRP, which was once the third largest cryptocurrency by market value, is filing a lawsuit with the U.S. Securities and Exchange Commission (SEC). The SEC believes that XRP is an unregistered security that needs to be regulated. Fortunately, XRP won the lawsuit, and it appears that they will settle with the SEC and will not face any major losses. This will set a strong precedent for all other cryptocurrencies, and the US Securities and Exchange Commission will have to ensure that they now only track cryptocurrencies that are absolutely securities.
The vast majority of cryptocurrencies are probably not securities. In fact, Bitcoin and Ethereum have been officially declared as non-securities. Together with most other cryptocurrencies, they are considered property for tax purposes. It is hoped that the US Securities and Exchange Commission can provide greater regulatory clarity for cryptocurrencies to make them more suitable for purchase. Whenever someone uses Bitcoin to buy something, they must report the transaction as a taxable event, which is a hassle that cash does not have. If the SEC creates a new asset class called “digital currency”, investors can not only speculate on Bitcoin, but also use it as their anticipated digital cash.
One type of cryptocurrency that may be declared as securities is exchange tokens, such as Binance’s BNB and FTX’s FTT. The value of these tokens is heavily dependent on their parent company, so it can be said that they are securities that derive value from the success of the parent company. For example, Binance uses part of its quarterly profits for the repurchase of BNB tokens and creates a use case for BNB by providing users with fee discounts when they use BNB to trade on the platform. “Without Binance, what is the use of Binance Coin?” This is a question that regulators will ask and will influence their decision on whether BNB and other exchange tokens are securities.
Another target area for regulators is stablecoins, especially those that are not fully backed by the U.S. dollar. Banks that have lobbied vigorously in Congress have been demanding regulation of stablecoins. This may be because stablecoins and DeFi may replace banks, and Congress is listening to their requests. They specifically target Tether, which has been censored in the past for lack of true 1:1 support for USDT. They only hold enough funds to support 77% of the USDT in circulation, which means that it is not really a coin pegged to the U.S. dollar.
Regulators are likely to require stablecoin issuers to be more transparent and fully support their stablecoins. Stablecoins may be completely banned or declared as securities. In the best case, fully supported stablecoins will be declared as currencies, which will reduce taxable events when they are exchanged for other cryptocurrencies or used in DeFi.
The future of decentralized stablecoins such as DAI is even more uncertain, because no company can sue or the server needs to be shut down. Even if they are over-collateralized by a basket of cryptocurrencies, the US Securities and Exchange Commission may think this is not enough. However, they cannot prevent the circulation of DAI because it is completely decentralized and not controlled by any entity. Stopping DAI is as difficult as stopping the entire Ethereum blockchain.
Tokenized stocks are very likely to be regulated by the US Securities and Exchange Commission. These tokens are assets linked to stock prices, and are usually implemented by using decentralized oracles like Chainlink. Compared with traditional stocks, they offer many benefits, such as being usable by anyone anywhere in the world, not just American citizens with bank accounts.
Binance has offered tokenized shares on its platform in the past, but recently removed it to avoid regulatory scrutiny. Mirror Protocol is a decentralized platform that allows the issuance of tokenized stocks, similar to the way Maker issues DAI as a stable currency. Even if Mirror is issuing unregistered securities, just like DAI, if the entire decentralized and immutable blockchain is not shut down, it cannot be stopped, so any regulation cannot be helpful.
Although the upcoming cryptocurrency regulation may cause a devastating blow to a few projects, most markets will remain unaffected. If the regulation is looser than investors expected, some projects may even see a rise in valuation, because regulation will become a small obstacle to the success of the project. Cryptocurrencies have survived multiple bear markets and crashes for 13 years, so some overdue regulations will not destroy the $1.6 trillion market.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-types-of-cryptocurrencies-may-be-banned-or-regulated-in-the-united-states-if-regulation-comes/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.