The White House’s First Crypto Framework and Missed Opportunities – Law Decoded, September 12-19

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Late last week, federal agencies presented the results of their six-month work on key guidelines for digital asset 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 part of President Joe Biden’s executive order, it will undoubtedly influence upcoming policy decisions.

Perhaps the most important part of the framework is devoted to central bank digital currencies (CBDCs). It showed that the administration has already developed policy objectives for a US CBDC system, but that further research into the possible technological underpinnings 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.

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The industry misunderstood the document, as policymakers’ focus on safety and enforcement is all too apparent. Kristin Smith, executive director of the US-based Blockchain Association, called it “a missed opportunity to strengthen US crypto leadership”, highlighting the strong emphasis on risks, not opportunities, and the lack of substantive recommendations on the promotion of the crypto industry. Sheila Warren of the Crypto Council for Innovation told TBEN that the policy recommendations appeared to be based on an “outdated and unbalanced understanding” of crypto, which could allow the details to be determined by other lawmakers or the next government.

The merger and its regulatory implications

Ethereum’s upgrade to proof-of-stake (PoS) may have put the cryptocurrency back in the sights of the Securities and Exchange Commission. SEC chairman Gary Gensler reportedly said cryptocurrencies and intermediaries that allow holders to “bet” their crypto can define it as a security under the Howey test. Gensler went on to say that intermediaries who offer strike services to their clients are “very similar – with some changes in the labeling – to lending.” The SEC has previously said it did not view Ether (ETH) as a security, with both the Commodity Futures Trading Commission (CFTC) and the SEC agreeing that it traded more like a commodity.

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18 possible design shapes for the US CBDC

The Office of Science and Technology Policy has submitted a report analyzing design choices for 18 central bank digital currency systems for possible deployment in the US. The technical analysis of the 18 CBDC design choices was made in six broad categories: participants, governance, security, transactions, data, and customizations. The OSTP report helped policymakers choose the ideal US CBDC system and 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 several factors related to permissions, access levels, identity privacy, and remediation.

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Thailand is preparing to ban crypto lending

Thailand’s Securities and Exchange Commission (SEC) is preparing to take radical action in the wake of the crypto lending platform crashes in the summer of 2022. The Thai SEC plans to ban crypto platforms from offering digital asset custody services or support. The planned ban includes several key points. It prohibits operators from depositing digital assets with the promise of paying returns to depositors – even if the returns do not come from the growing value of the assets, but from the promotion budget. Advertising for lending and storage services would also be banned.

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