Coin Center has provided a detailed analysis of the evolving crypto policy landscape following the US Elections.
According to the update from Coin Center, crypto got a lot of attention in the recent election, and many are now “wondering how friendly the new administration and Congress will be.”
As noted by Coin Center, they now expect things to improve in “some areas, while others will remain challenging.”
They anticipate good policy may be easier to achieve in the “areas of securities and banking regulation, with the potential for clearer rules governing centralized secondary markets and centralized stablecoin issuers.”
As stated in a blog post by Coin Center, the outlook is less certain in the following key areas: anti-money laundering, tax-reporting, and sanctions arenas.
Coin Center claims that it will remain focused on “protecting the rights of developers who are working on software for self custody and privacy as well as the rights of ordinary Americans who want to use those tools.”
Here is how they claim to be thinking about these issues and their preliminary analysis of the opportunities and the challenges ahead.
As mentioned in the update from Coin Center, one can roughly divide policy issues for crypto “into two super-categories: surveillance issues (tax-reporting, BSA/AML, sanctions) and investor protection issues (SEC, CFTC, Banking).”
And cchieving good policy in one “super-category does not guarantee similar positive outcomes in the other.”
The rationales behind each policy area “differ (protecting investors vs. identifying and stopping illicit flows of funds), as do the political motivations and coalition-building opportunities of legislators focused on one area or the other.”
As explained by Coin Center, one can divide the crypto ecosystem “into two super-categories: centralized businesses (custodial wallet providers, centralized exchanges, trusted issuers) and decentralized infrastructure developers and users (protocol developers, non-custodial wallet and app developers, and non-intermediated users of those protocols and applications).”
Coin Center said that it wants good policy on all dimensions, but their core mission is to defend the “rights of the developers and users of decentralized and peer-to-peer tools.”
An “overzealous” regulatory regime in either the investor protection space or the surveillance space “could threaten developers and users,” Coin Center noted while adding that the threats from the surveillance arena “have lately been more profound.”
Coin Center’s mission is focused on decentralized infrastructure developers’ right “to publish code (First Amendment issues) and on stopping unwarranted surveillance obligations (Fourth Amendment issues), and that fourth quadrant box is the overlapping battleground for both topics.”
Even if we are “biased” however; there does appear “to be more aggression in that issue area than any other over the last four years.”
Coin Center further noted that there are any number of explanations for that from optics and “news cycle arguments, wherein politicians wrongly or opportunistically identify global and foreign policy tragedies with crypto (Hamas funding, Russian oligarchs attempting to circumvent sanctions), to political coalition-building wherein the left and the right rarely agree but sometimes find common cause on perceived issues of national security and surveillance.”
The last few years have been replete with grave threats “to the freedoms of individual cryptocurrency users and developers.”
They claim to have watched an overzealous SEC venture closer and closer to directly regulating “individual developers and users in their exchange redefinition rulemaking, and their enforcement actions against wallet providers like Consensys’ Metamask and Coinbase Wallet.’
Coin Center have reportedly seen surveillance issues “come to the fore: 6050I reporting obligations, Tornado Cash sanctions, broker reporting obligations, and unlicensed money transmission prosecutions for non-custodial developers.”
Coin Center added that in Congress they have fought against legislation that would impose “unjustifiable surveillance obligations on non-custodial developers in bills like CANSEE and DAMLA.”
As mentioned in the update from Coin Center, some top threats come to mind: (1) 6050I, (2) Tornado Cash sanctions, and (3) unlicensed money transmission prosecutions.
First, Coin Center revealed they have ongoing litigation in the 6050I context; they are arguing that mandated “warrantless reports to the IRS, which include personal information for those receiving $10,000 or more in crypto, are unconstitutional.”
Second, Coin Center also have ongoing “litigation in the Tornado Cash sanctions context; they are arguing that sanctions laws do not give the Treasury the power to ban Americans from using tools, like immutable smart contracts, that are neither foreign persons nor their property.”
Finally, they claim to have watched with alarm as the Southern District of New York has brought unlicensed “money transmission prosecutions against the developers of non-custodial software tools (Tornado Cash and Samurai Wallet), and they will continue to aid the defendants in those cases as best as we can.”
The DOJ may change under a Trump administration, but it “rightly guards its political independence and may therefore be unlikely to abandon these prosecutions because of a change in administration.”
Coin Center pointed out that, in general, claims that the new administration will “be good for US-based centralized businesses and especially good with respect to investor-protection issues seem credible.”
They added that they are “optimistic” that Congress may be primed to take on a bigger role in pushing back on these “surveillance issues.”
Coin Center acknowledged that much work has been done as members have sent letters “criticizing 6050I implementation, the Tornado Cash sanctions, and the unlicensed money transmission prosecutions.”
They concluded that Bills like the Blockchain Regulatory Certainty Act would offer a legislative solution “to the unlicensed money transmission prosecutions and we’re ready to find a bipartisan path forward for its passage.”