There are two things that make cryptocurrencies attractive for a lot of people. It is both unregulated and it offers anonymity. In fact, it offers some form of anonymity since the development of crypto-forensics. But even that can soon be over.
Sujit Raman, who is the assistant deputy attorney general at the Justice Department, said that “one of our major concerns is that we don’t know who has access to these virtual currencies, and who is using them”. The concern mainly stems from the possibility that crypto-assets can be used in order to fund terrorist activities as well as perform money laundering. And because of this, it has pushed to trading platforms as well as others to collect information in order to know who is buying and selling the digital currencies. And pretty much, it makes crypto exchanges function like banks.
The design of cryptocurrencies hides its users. Unfortunately, it has attracted criminals to transact using Bitcoin considering the level of protection that they get from it. And for Washington, this can be a problem. If you will ask Raman, “for us to have more visibility into that is very, very important”.
James McDonald, who is the head of enforcement at the Commodity Futures Trading Commission mentioned that “Participants want to know who is on the other side of the transaction”. He added that “they want to know that the other entities are going to be playing by the same rules”.
ICOs are also being targeted. Robert A. Cohen who works as chief of the Securities and Exchange Commission’s cyber unit mentioned about small companies that make use of initial coin offerings in order to raise funds. He said that “If a person is raising money for a business, or an entrepreneurial idea, and people are giving money to that person with the hope that, if they’re successful, they’re going to make a profit off the efforts of others, that’s a security. That’s raising capital for a business”.
Complicating the Market
According to James Bullard who works at the St. Louis Federal Reserve Bank, he mentioned that cryptocurrencies complicate the existing market. Among his concerns is multiple digital currencies trading separately that can have a major impact on the exchange rate. And he told CNBC that this is a “big deal”.
He compared cryptocurrencies to the old days. He compared it to 1830s when money was privately created. And with the creation of digital currencies, it has brought the US back to non-uniform currencies that can cause problems. He mentioned at the Consensus 2018 conference that “Cryptocurrencies may unwittingly be pushing in the wrong direction in trying to solve an important social problem, which is how best to facilitate market-based exchange”.
But is Bitcoin a threat to the US dollar? According to him, this isn’t the case. At least, this is not yet the case.
Will there be new laws covering cryptocurrencies in the US in the near future? And this time around, will this be a federal regulation that can curb the use of cryptocurrencies? Will these regulatory changes create bearish trends for cryptos again?