The newly elected US President Joe Biden has frozen all regulatory proceedings on the widely contested FinCEN crypto regulatory proposal.
One of the first actions Joe Biden has taken in his first day of office is to halt a Federal regulatory process, including the controversial self-hosted crypto wallet rule proposed by former Treasury Secretary Steve Mnuchin.
The revelation came in a White House memorandum for the change in heads of several federal agencies, the Financial Crimes Enforcement Network (FinCEN) included. The edict does not rubbish the proposal, but places a general freeze on agency rulemaking pending review, effective for 60 days from the date of the memorandum.
No doubt, the over 65,000 comments and exchanges lobbying against the ruling played a role in this decision.
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Industry insiders welcomed the move, with Compound Finance General Council Jake Chervinsky tweeting;
“We fought hard & earned the right to take a breath & reset. Janet Yellen isn’t Steve Mnuchin. I’m optimistic.”
Under the rule proposed by former US Treasury Secretary Mnuchin, banks and money services would be required to verify the identity of customers who make transactions for and from private cryptocurrency wallets. This would effectively eliminate any form of financial privacy or pseudonymity for individuals using cryptocurrency wallets.
Square CEO Jack Dorsey also criticised the proposal, saying that the counterparty name and address collection should not be required for cryptocurrency just as it’s not required for cash today.
Critics also say that it would be technically impossible since a lot of projects that use smart contracts do not contain name or address information.
Biden has appointed Janet Yellen to take over as the new US Treasury Secretary, who has already indicated hostility towards cryptocurrencies, incorrectly alleging that most crypto transactions are mainly used for ‘illicit financing’. However, as explained in the Chris on Crypto newsletter on Wednesday, nothing could be further from the truth.
Biden also picked Gary Genslser to head the Securities and Exchange Commission who seems more sympathetic to the bitcoin mission.
Gensler’s overall appraisal of bitcoin’s governance shows a level of familiarity with bitcoin that is rarely seen in government. As reported by Cointelegraph, he said:
“When you’re dealing with a central authority, a commercial bank, they can decide whether to extend credit or not. That’s a form of censorship. It’s a form of allocating something,” Gensler said. “But distributed decentralized platforms are more censorship resistant“.
Wolf in Sheep’s Clothing?
All in all, it appears that some members of the Biden administration are not outright attacking cryptocurrencies. However, the Treasury Secretary’s comments on bitcoin stand in contrast to Biden’s freezing of the controversial FinCEN ruling – which will most likely come back in some other form.
Besides that, it’s hard to imagine a scenario where stablecoins continue effectively operate outside the traditional financial ecosystem, which is of course mired in red tape and complex regulations. At the same time, Gensler’s past comments on bitcoin appear to appreciate the fact that bitcoin and decentralised finance can only be directed – they cannot be stopped. Perhaps he grasps the reality that monetary and financial competition between countries is inevitable.
Having just entered the White House, the new Biden administration undoubtedly has a lot on its plate that stretches far beyond the relatively small $1 trillion cryptocurrency industry. Perhaps US domestic issues will take precedence over a heavy-handed approach on crypto this year.
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