Following the explosive rise of their price and popularity, cryptocurrencies have come under increased scrutiny from governments and regulatory bodies. Although the legislative field is still playing catch up with respect to players in the virtual currency arena, there have been enforcement actions and a renewed focus on the regulation of crypto activities and participants.
Most notably, the appointment of Gary Gensler by President Biden on April 14, 2021, as the new Chairman of the Securities and Exchange Commission (SEC), commences a new era for cryptocurrencies, and financial technologies in general. Before joining the SEC, following his public sector role as the Chairman of the Commodity Futures Trading Commission, Gensler was a professor at MIT, where his teaching and research focused on blockchain technologies and digital currencies – all of which signal there is more coming to the crypto-regulatory space.
Most recently, on April 23, 2021, The Office of the Comptroller of the Currency (OCC) announced preliminary conditional approval of the application to charter for Paxos National Trust. If granted, Paxos will become the third cryptocurrency firm to score a federal trust charter through the OCC.
Within the U.S. Federal government, the regulatory focus for cryptocurrencies has been at the administrative and agency-level including:
- Commodity Futures Trading Commission (CFTC),
- Securities and Exchange Commission (SEC),
- Federal Trade Commission (FTC),
- Internal Revenue Service (IRS),
- Office of the Comptroller of the Currency (OCC),
- Federal Reserve,
- Financial Crimes Enforcement Network (FinCEN).
Each regulator has its own stance on the regulation of cryptocurrency, or on the contrary, deregulation. Additionally, the different classifications of cryptocurrency by the regulators often make it confusing. The SEC oversees digital assets that are considered securities; the CFTC treats virtual currency as a commodity, while the IRS treats it as property. Additionally, the divide between pro-cryptocurrency states such as Wyoming and Colorado, and states with tighter regulations such as New York, adds another layer to the messy web of rules for companies dealing with virtual currencies.
Most recently, in February 2021, The Office of Foreign Assets Control Group (OFAC) fined BitPay Inc. for violations of multiple sanctions programs related to cryptocurrency transactions, with a settlement of $507,375. In March 2021, Coinbase, a digital currency exchange operator, paid a penalty of $6.5 million to settle charges from the CFTC for reporting violations and improper trading activity.
