White House’s first crypto framework and missed opportunities — Law Decoded, Sept. 12-19

Regulation

By the end of last week, the federal agencies presented the results of their six-month-long work on the principal directions for digital assets regulation in the United States. The resulting first-ever crypto framework, published on the White House website, may not contain many surprises or exact details, but, as a part of President Joe Biden’s executive order, it will undoubtedly affect the policymaking decisions to come. 

Perhaps the most important section of the framework is dedicated to central bank digital currencies (CBDCs). It revealed that the administration has already developed policy objectives for a U.S. CBDC system, but further research on the possible technological foundation of that system is needed. Still, the intent seems pretty serious as the Treasury will lead an interagency working group with the participation of the Federal Reserve, the National Economic Council, the National Security Council and the Office of Science and Technology Policy.

The industry didn’t take the document well, as the policymakers’ focus on security and enforcement is all too visible. Kristin Smith, executive director of the U.S.-based Blockchain Association, called it “a missed opportunity to cement U.S. crypto leadership,” highlighting its heavy emphasis on risks, not opportunities, and the lack of substantive recommendations on the promotion of the crypto industry. Speaking to Cointelegraph, Sheila Warren of the Crypto Council for Innovation said the policy recommendations seemed to be based on an “outdated and unbalanced understanding” of crypto, which could leave the details to be determined by other lawmakers or the next administration.

The Merge and its regulatory repercussions

Ethereum’s upgrade to proof-of-stake (PoS) may have placed the cryptocurrency back in the crosshairs of the Securities and Exchange Commission. SEC chairman Gary Gensler reportedly said that cryptocurrencies and intermediaries that allow holders to “stake” their crypto may define it as a security under the Howey test. Gensler went on to say that intermediaries offering staking services to their customers “looks very similar — with some changes of labeling — to lending.” The SEC has previously said they didn’t see Ether (ETH) as a security, with both the Commodity Futures Trading Commission (CFTC) and the SEC agreeing that it acted more like a commodity.

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18 potential design forms for the American CBDC 

The Office of Science and Technology Policy submitted a report analyzing the design choices for 18 central bank digital currency systems for possible implementation in the U.S. The technical analysis of the 18 CBDC design choices was made across six broad categories: participants, governance, security, transactions, data and adjustments. Helping policymakers decide on the ideal US CBDC system, the OSTP report highlighted the implications of including third parties in the two design choices under the “participants” category — transport layer and interoperability. For governance, the report weighed various factors related to permissions, access tiering, identity privacy and remediation.

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Thailand prepares to ban crypto lending 

The Securities and Exchange Commission (SEC) of Thailand is preparing to take radical measures in the aftermath of crypto lending platforms’ crashes experienced in Summer 2022. The Thai SEC plans to prohibit crypto platforms from providing or supporting digital asset depository services. The planned ban includes several principal points. It will prohibit operators from taking a deposit of digital assets with a promise to pay returns to depositors — even if the returns come not from the growing value of the assets but from the promotion budget. The advertising of lending and depositary services would also be banned.

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