Cryptocurrency regulation is an ever-evolving area of law that affects both the public and private sectors. Lawyers need to stay on top of regulatory changes in this space so they can best serve their clients. To do so, lawyers must understand what laws govern the industry and how they work.
For example, cryptocurrency firms must follow anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations, and they must register with FinCEN, a division of the Department of Treasury. In addition, some states regulate how crypto is used by their residents. For instance, the state of Illinois requires crypto businesses to obtain a license.
But many of the rules surrounding cryptocurrency remain ambiguous. For example, the SEC sees cryptocurrencies as securities, like stocks, and the Commodity Futures Trading Commission views them as commodities, similar to wheat or gold. The varying regulatory interpretations have caused confusion for consumers and businesses.
In 2022, President Biden announced a framework to help clarify the scope of federal regulators’ authority over crypto-centric businesses and projects. It also lays out a path for a U.S. central bank digital currency (CBDC), a development that would have broad implications for the economy, consumer protection, and security.
The framework also green-lights new legislative efforts to further address the regulatory challenges faced by the crypto industry. Specifically, the Clarity Act will shift the SEC’s responsibility for overseeing digital assets to the CFTC, a move that would make it easier for the industry to operate and comply with federal regulations. It also mandates that stablecoin issuers maintain full reserve backing, ensuring that each coin can be reliably redeemed for its face value.
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