Are you someone involved in the world of cryptocurrency, whether as an investor, enthusiast, or critic, who believes that the industry is in need of regulations? Are you relying on traditional entities such as the CFTC, SEC, FBI, and IRS to take charge and regulate the market? Do you have faith that these entities have the best interests of Bitcoin at heart? Are you hoping for regulations that will benefit investors? It is understandable if you have a positive and naive perspective on this matter.
Crypto regulations or control?
Over the past year, prominent figures in the crypto industry, such as CZ and Binance, have faced significant challenges from the SEC and CFTC. After settling his $4.3 billion debt with the SEC, Changpeng “CZ” Zhao now faces a recommendation from the U.S. Department of Justice (DOJ) for a three-year prison sentence due to his involvement in allowing the crypto exchange to violate federal sanctions and money laundering laws.
Attorneys from the DOJ have submitted a sentencing memo suggesting a 36-month prison term and a $50 million fine for CZ’s violation of the Bank Secrecy Act, to which he pleaded guilty in November.
Shortly after, CZ’s defense team submitted their own sentencing memo, pointing out that no defendant in a similar case involving the Bank Secrecy Act has ever received a prison sentence. Instead, they proposed probation, potentially including home confinement at CZ’s residence in Abu Dhabi.
One crypto analyst known as Crypto Tea summarized the situation by saying, “the FBI refers to crypto as money so they can charge you with money laundering […] the IRS treats it as property so they can tax you on capital gains […] the SEC defines it as a security so they can sue every exchange […] the CFTC considers it a commodity so you can’t use it as a currency.”
So, what exactly are these organizations demanding from the decentralized crypto community when it comes to regulations?
Binance co-founder He Yi stated that while CZ admits to making mistakes, his biggest one was ignorance. The rest of the industry should not continue making this mistake.
What do the SEC, CFTC, DOJ, FBI, and IRS want in terms of crypto regulations?
Last year, the House Financial Services Committee conducted a hearing titled “Oversight of the Securities and Exchange Commission” with SEC Chair Gary Gensler as the sole witness. During a recent SEC Oversight hearing in Congress, Chairman Patrick McHenry engaged in a heated exchange with Gensler regarding the classification of Ether as a security or a commodity.
This hearing once again witnessed a back-and-forth discussion, with the focus shifting towards inquiries about Bitcoin. Chairman McHenry consistently prioritized these questions as the opening inquiries during both hearings. It appears that policymakers are still struggling to determine the appropriate regulatory approach for the top two digital assets, Bitcoin and Ether, given their market size.
What is truly important is whether Congress should take action to establish a regulatory framework that instills confidence in consumers, investors, and businesses when it comes to digital assets.
What is evident is that each of these entities stands to benefit from crypto. How? You may ask. Through paid fines, as seen in CZ’s case, and through social media influencers, such as Kim Kardashian. Additionally, they benefit from confiscated digital assets from illegal seizures, like those related to the Silk Road.
And do you know what the ultimate victory is? You guessed it! Absolute financial control. The emergence of Bitcoin brought about decentralization, which stripped centralized entities, like the ones mentioned above, of their financial control.
As these regulatory bodies “assist” with crypto regulations, they are essentially returning money and power to Washington, D.C. Let’s not be mistaken, the regulations in the industry will favor the regulators more than the crypto investors.