How to Make the United States the Crypto Capital of the World

Dear President-Elect Trump,

In your keynote code astatine the Bitcoin league successful Nashville past year, you pledged to marque the United States the crypto superior of the world if re-elected for a 2nd term. As you instrumentality to the statesmanlike bureau this Monday, we constitute to you arsenic practicing members of the crypto instrumentality barroom to urge regulatory policies that volition assistance you to execute that goal.

The United States, which rests connected the aforesaid instauration of idiosyncratic liberty arsenic crypto, is people positioned to pb the satellite successful its development. Unfortunately, U.S. regulators person until present refused to accommodate existing laws to integer assets and the blockchains that underpin them (or adjacent to explicate wherefore not), and created an unfavorable concern situation that has driven galore entrepreneurs and developers abroad.

To unleash American ingenuity and remedy this neglect of the blockchain industry, we suggest that you prosecute the beneath forward-looking policies crossed 3 areas: supporting U.S. companies; promoting crypto values specified arsenic privacy, disintermediation, and decentralization; and cultivating a favorable concern situation domestically.

Supporting U.S.-Based Businesses

The crypto manufacture has produced a scope of established and emerging use-cases, including integer gold, stablecoins, permissionless payments, decentralized finance, real satellite assets, decentralized carnal infrastructure (DePIN), and many more. Many of them are being responsibly precocious successful the United States by businesses specified arsenic Coinbase, Circle and Consensys, and by developers contributing to crypto’s open-source, decentralized infrastructure. To proceed competing against their planetary rivals, these parties request wide rules of the roadworthy and due regulatory guidance.

General Rules of the Road

Token issuance and secondary sales, which prevarication astatine the bosom of the crypto economy, are taxable to confusing and overlapping regulatory authorization from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Market operation authorities should intelligibly delineate the scope of jurisdiction among superior regulators and laic retired erstwhile assets participate and exit that jurisdiction.

Here, Congress should defy giving the U.S. securities laws an overbroad application, as the SEC has done. Tokens powered by open-source bundle and statement mechanisms that are different minimally babelike connected centralized actors are not securities due to the fact that determination is nary ineligible narration betwixt token owners and an “issuer,” arsenic understood by the securities laws. Similarly, crypto assets specified arsenic creation NFTs (which are simply integer artwork) and non-investment activities, similar staking and lending bitcoin, autumn extracurricular the securities laws.

Congress should beryllium bold. That means not feeling bound by anterior legislative efforts similar FIT21 that were forged successful an earlier governmental situation that person unintended consequences. It besides means leveraging the regulatory acquisition of different nations, specified arsenic the European Union with its MiCA framework, portion avoiding their pitfalls and charting a unsocial and dauntless way guardant for the United States.

Specific Sectors

Besides advocating for wide rules, your medication should impulse Congress and the applicable agencies to code circumstantial sectors owed to their strategical value to the crypto manufacture and the nation.

Stablecoins. Stablecoins, with a existent marketplace headdress successful excess of $200 billion, are the lifeblood of the integer plus ecosystem. Increasingly recognized nether frameworks similar the Stablecoin Standard and by authorities regulators, they warrant broad authorities for their issuance and management, ensuring that they are transparently backed and bash not endanger fiscal stability. Aside from benefitting consumers, regulatory enactment of stablecoins furthers nationalist interests. Similar to Eurodollars, stablecoins, which are usually denominated successful U.S. dollars, reenforce the dollar’s presumption arsenic the planetary reserve currency and summation request for U.S. treasuries, which issuers clasp successful reserve.

TradFi Integration. The unprecedented occurrence unprecedented success of Bitcoin and Ethereum ETFs demonstrates that crypto has begun integrating with accepted finance. Regulatory argumentation should guarantee a harmless and orderly integration by giving consumers entree to trusted custody services. This requires amending oregon rescinding prejudicial SEC accounting guidelines (for instance, SAB 121) and custody rules. But it should not halt there. Pro-innovation argumentation successful this country should besides beforehand the tokenization of securities representing accepted fiscal assets similar stocks, bonds, oregon existent property arsenic blockchain-based tokens. The resulting benefits, which see improved liquidity, fractional ownership, and faster settlement, would fortify U.S. superior markets, ensuring they stay the astir developed and innovative successful the world.

DeFi. Decentralized concern has the imaginable to modernize the planetary fiscal strategy and to instrumentality worth to mean Americans by removing costly fiscal intermediaries. You should not let entrenched interests and alarmism to halt the United States from becoming the world’s person successful DeFi. In this regard, regulations aimed astatine centralized actors, specified arsenic exchanges and issuers, indispensable beryllium crafted successful ways that debar inadvertently capturing and paralyzing the still-nascent DeFi ecosystem.

Fostering Innovation done a Commitment to Crypto Values

If it is to beforehand crypto innovation, regulatory argumentation indispensable amusement respect for crypto values, including privacy, disintermediation, and decentralization. Two cardinal regulatory principles originate from this commitment. First, regularisation should not enforce greater burdens connected crypto wherever accepted analogs exist. Second, regularisation should germinate wherever accepted analogs are absent.

When To Treat Crypto the Same arsenic Traditional Assets and Tools

The archetypal rule impacts products similar self-custody wallets, which alteration users to clasp and negociate their ain backstage keys. Because these tools are analogous to carnal wallets utilized for idiosyncratic plus management, they should not beryllium treated immoderate otherwise — namely, arsenic fiscal intermediaries for purposes of regulatory surveillance and monitoring. You are not required to implicit KYC earlier you tin spot currency successful a carnal wallet; the aforesaid should beryllium existent for storing tokens successful your integer wallet.

Similar logic applies to the taxation of artifact rewards. Americans mining oregon validating blockchain transactions are creating caller property, conscionable similar farmers increasing crops successful their fields. And yet, the IRS presently taxes them connected that income. This differential attraction should beryllium abolished.

When To Treat Crypto Differently

The 2nd rule demands regulators defy placing crypto actors and activities into bequest frameworks that are incompatible with crypto. Doing truthful damages the crypto ecosystem, pushes the manufacture abroad, and erodes the Rule of Law.

Regrettably, this is the way that galore U.S. regulators person chosen. The IRS

has begun treating crypto front-ends arsenic “brokers” absent statutory authority. The Department of Justice has begun charging non-custodial wallet developers with unlicensed money-transmission violations contempt its longstanding argumentation to the contrary. And the U.S. Treasury has sanctioned the astute contract of privateness mixer Tornado Cash adjacent though it is neither a overseas idiosyncratic nor property, but simply code. (An appellate tribunal overturned the sanction.)

Without diminishing the value of the governmental interests astatine play (tax evasion, wealth laundering, and nationalist security), we taxable that the government’s approaches successful each lawsuit are incorrect arsenic a substance of innovation policy, and we promote your medication to reverse them.

Instead of regulating integer plus and blockchain businesses similar accepted companies, we impulse regulators to collaborate with this caller technological paradigm and with our industry. For example, if authorities surveillance (KYC) successful a decentralized situation is really justified successful definite instances, regulators tin leverage blockchain-based credentials that are portable crossed protocols, springiness users power of their information (a payment of Web3 architecture), and are aligned with the frictionless blockchain ecosystem. Similarly, they tin marshal the programmability of tokens and astute contracts to exclude sanctioned parties from parts of the crypto economy.

Attracting Top Talent With a Welcoming Business Environment

To go the starring destination for apical crypto talent, the U.S. indispensable cultivate a favorable concern environment. Your medication tin statesman this process connected Day One.

End de-banking of crypto companies. Your medication should nonstop the FDIC and each different agencies progressive with Operation Chokepoint 2.0 to instantly cease their unaccountable run aimed astatine de-banking the crypto industry.

Improve SEC rule-making and enforcement. You should instruct your SEC seat to overhaul that agency’s attack to crypto. Over the past 4 years, the SEC has consistently exceeded its authorization by pursuing bully religion manufacture leaders specified arsenic Coinbase and Consensys, regulating idiosyncratic developers and users (in its speech redefinition rulemaking), and launching enforcement actions against wallet providers. It is clip for the SEC to close this pernicious attack and statesman engaging constructively with the crypto manufacture portion focusing its efforts connected preventing fraud alternatively than curbing fiscal speculation, which has benefits for innovation.

Roll backmost punitive taxation rules. Your medication should rotation backmost punitive taxation rules that propulsion entrepreneurs and developers overseas portion leaving well-meaning taxpayers uncertain astir however to cipher their taxation bills. Low-hanging effect improvements see the adoption of existent expensing for bundle development; taxation deferral for validation rewards and airdrops; a harmless harbor for de minimis consumptive transactions (e.g. little than $5,000); a mark-to-market predetermination for crypto investors and a repeal of IRS reporting regulations that dainty websites arsenic brokers. Congress should besides repeal amendments to Section 6050I, which enforce burdensome (and apt unconstitutional) reporting requirements connected crypto transactions implicit $10,000.

Reduce unnecessary reddish tape. Consistent with the ngo of the Department of Government Efficiency (D.O.G.E.), we impulse your bureau to enactment with Congress and authorities agencies to trim the unnecessary reddish portion restraining crypto and fintech. This includes simplifying oregon eliminating registration and reporting requirements for integer plus offerings that conscionable definite conditions, including providing indispensable capitalist disclosures. Congress should besides see legislating a unified national model for money transmission licensing that would bring clarity and ratio to the broader fintech ecosystem.

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In pursuing the supra forward-looking policies, we promote your medication to consult with manufacture leaders and stay delicate to the transnational scope of the integer plus ecosystem. (We presumption your enactment of a Crypto Council arsenic a affirmative measurement successful this direction.) We besides urge leveraging devices, specified arsenic regulatory sandboxes, that bounds the hazard of unintended regulatory consequences.

The clip is ripe for the United States to statesman asserting its planetary regulatory leadership. By ensuring that it does, your medication volition beryllium contributing to the country’s aboriginal economical prosperity and endorsing a exertion that rests connected profoundly held American values and freedoms. You should prehend the moment.

Sincerely,

Ivo Entchev, Olta Andoni, Stephen Rutenberg, Donna Redel

The pursuing members of the Crypto Law Bar besides signed this letter: Mike Bacina, Joe Carlasare, Eli Cohen, Mike Frisch, Jason Gottlieb, Eric Hess, Katherine Kirkpatrick, Dan McAvoy, John McCarthy, Margaret Rosenfeld, Gabriel Shapiro, Ben Snipes, Noah Spaulding, Andrea Tinianow, Jenny Vatrenko, Collin Woodward, and Rafael Yakobi.

The views represented and reflected upon herein are those of the signatories and not needfully of their employers.