The biggest regulatory story of the week was a United States House Committee on Financial Services hearing squarely focused on crypto. Even the event’s title — “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” — conveyed a different vibe than countless previous Congressional meetings that had been first and foremost about investor protection or security risks or threats to financial stability.
The exchange has been viewed as a tremendous net benefit by many industry participants and authorities, with legislators asking informed questions rather than acting on preconceived notions. Of course, there were weary inquiries about Bitcoin’s environmental impact and Representative Brad Sherman’s anti-crypto rants, but in the end, it appeared to be a beneficial discussion between the digital asset.
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Hearing the industry –
The Financial Services Committee Chair Maxine Waters called for a hearing on cryptocurrencies and blockchain technology, which has been dubbed “Crypto 101,” at the request of her committee. The hearing focused on crypto exchanges, the growth of stablecoin businesses, and broader digital asset regulatory concerns. Several top crypto CEOs were called to testify on behalf of the cryptocurrency industry.
The cryptocurrency-powered decentralization of the digital ecology — a politically advantageous angle when many US politicians are concerned about Web 2.0-era tech giants’ power grab – was among the major topics discussed on the House floor, as well as regulators’ reluctance to concede certain crypto investment products that might be regarded as symptoms of a fragmented approach to regulation.
BIS –
Not to get too distracted by what appears to be a win on the Congress floor, a quick note on the Bank of International Settlements’ most recent study on decentralised finance is required. The “bank for central banks” went deep into the vast DeFi landscape and produced a handful of alarmist comments such as “illusion of decentralisation.”
Some structural characteristics of the DeFi landscape, such as liquidity mismatches and a lack of shock absorbers like banks, are worrying to BIS experts. According to the study’s authors, protocols governing DeFi activity come with risks of centralization that might result in a concentration of power among these systems in the hands of a few.
CBDC –
The Bank for International Settlements’ desire for a more regulated financial innovation may be seen in the press coverage about the BIS’s Innovation Hub, which is currently participating in digital euro-based cross-border settlement trials with Switzerland and France’s central banks. The test was deemed a success, but the parties acknowledged that it does not imply the ultimate release.
In other news from the world of centralised digital currency, the Reserve Bank of Australia completed a two-year long inquiry with a report stating that a wholesale central bank digital currency may improve financial market efficiency.
The crypto industry has been waiting for regulation to be put in place so that the barriers to entry are removed and more investment capital flows into this innovative space. It seems like these direct exchanges between U.S. lawmakers and the crypto industry may finally be taking a constructive turn, but it’s too early yet to tell whether or not they will lead to any substantive action on behalf of Congress. If you need help calculating your cryptocurrency tax liability before reporting obligations come due, we have experts standing by ready to assist with all of your accounting needs. Contact us today at Crypto Tax Calculator Australia!