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How do U.S. regulators shuffle? Where will the 2021 encryption regulatory policy go?

America’s ambition to take the lead in cryptocurrency and blockchain has long been clear to the public. As the vane of encrypted currency, the United States also has a positive attitude towards the overall regulatory policy in the field of encrypted currency and blockchain and adopts the strategy of encouraging investment and strict supervision.

At the end of 2019, the United States Congress proposed a total of 21 bills related to blockchains and encrypted digital currencies, which were also on the agenda of Congress in 2020.

A new version of the Encrypted Currency Act 2020 was introduced by U.S. Congressman Paul Gosar on March 9, 2020. The main content is to clarify the terms of reference of federal regulators to regulate encrypted digital money and to divide encrypted digital money into three categories: encrypted digital goods, encrypted digital money and encrypted digital securities.

The United States really began to accelerate the field of encryption, the potential to “encryption world lord” sits firmly.

01. OCC

Established in 1863 under the Treasury Department, the OCC oversees the federal banking system, including branches and institutions of state banks, federal savings associations and foreign banks in the United States, for a total of 1 These institutions hold 70% of the total assets of the US banking system.

Since 2020, regulatory and institutional investors’ attitudes towards digital money have been divided into two levels, regulatory dynamics are constantly changing, institutional investors have entered the market on a large scale, focusing on the U.S. digital asset industry. U.S. banking in the opening of encrypted monetary and financial services also began to enter an accelerated stage.

Brian Brooks was appointed chief operating officer and first deputy director of the OCC in march 2020, promoted to acting director in May of the same year, and focused on moving us banking industry towards the digital association.

Brooks believes that encryption companies may be bound by the federal licensing system if the services they provide can be called payment services, whether it is more meaningful to treat encryption projects as local or global projects. If they are global, the rationality of having a single national license makes more sense. In Brian Brooks’s perception, encryption is becoming more and more like banking in the 21 st century.

OCC seeks public opinion to standardize new technologies and digital banking activities, including encrypted currency and blockchain tools, on June 4, 2020. According to a proposed rule-making circular issued by it, the OCC is re-examining the provisions on digital banking activities to ensure that these regulations can continue to evolve with the development of the industry.

Brooks has always been very friendly to blockchain and encryption, he believes that blockchain and encryption technology has huge and broad prospects. While he agrees with the benefits of BTC、ETH and XRP, he does not believe that the federal government needs to issue central bank digital currencies (CBDC). He doesn’t think the government should play a role, but the Fed and SEC need to build a framework for digital money.

Soon, Brooks announced that OCC planned to launch in the fall of 2020 a “payment concession 1.0(Payments Charter 1.0)”. Version 1.0 will be a “national version of the United States state currency transfer license “, providing a” national platform with priority “for non-bank payment providers, but not access to the Federal Reserve’s payment system. Brooks said that after about 18 months of running version 1.0, OCC will launch version 2.0, which he expects will include direct access to the Fed’s payment system.

OCC issued an open letter on 23 July 2020 stating that the National Savings Bank and the Federal Savings Association could provide encrypted currency custody services to their clients. A month after the OCC sought public opinion on the digital activities of such institutions (including digital assets and blockchain areas), it also marked a major change in the relationship between U.S. banking and the nascent encrypted currency ecosystem.

As for “OCC saying that the national savings bank and the federal savings association can provide customers with encrypted money custody services,” gu yan xi, a long-term practitioner of the Chinese-American securities market, a blockchain and encrypted digital asset researcher, said u.s. retail customers have more options to preserve their encrypted money assets, and thus lower the cost of custody, which also helps commercial banks enter the encrypted digital currency field. So this is a good thing for commercial banks and retail customers.

Several U.S. banks responded to August 11, 2020, OCC’s request for comments on the proposed rules for the National Bank and Federal Savings Association Digital Activities. Notably, several banks, including Bank of America and PNC, have indicated that they may be interested in providing customers with encrypted custody and other services.

A new guideline was issued by the OCC on 21 September, when the Federal Chartered Bank could hold reserves for stable currency issuers. Brooks said in a statement that the guidelines provide more regulatory certainty for banks in the federal banking system, enabling them to serve customers safely and reliably.

On Nov.1, U.S. banking institutions approached encrypted trusts such as Anchorage and Coinbase. At that time, Brooks also speculated that banks would work with or acquire Bitcoin custodians to manage their customers’ encrypted currencies because of the complexity of Bitcoin custody.

On November 17th the OCC issued a “payment warrant” and stated that the “national trust bank license” was a way to apply for encrypted banks when OCC had received applications from some encryption companies to convert their state trust company license into a national trust bank license.

Brooks never stopped on the road to boosting the digital asset industry. December 4, Brooks said on CNBC program that the Trump administration will launch a series of encrypted currency banking operations and policy initiatives in the final days of its term. He seems to suggest that transparency in encrypted banking will come.

Brooks says we don’t need 50 rules for encryption, but we need to be clear about what is allowed. “Banks directly into the blockchain as a payment network” is positive. Encrypted money may have been a bubble two years ago, but as its clarity improves, institutions that identify with its value have begun to adopt it on a large scale.

For much of Trump’s tenure, OCC did not engage heavily in encryption, except for legal disputes surrounding the Financial Technology Charter. Only after Brooks joined the OCC did OCC really start initiatives related to the industry. Brooks once said that regulatory transparency is currently driving up the price of encrypted money, the digital asset industry’s legal policy is still facing an uncertain future.

On January 15, 2021, the cryptocurrency-friendly Brooks formally stepped down as OCC acting director, to be replaced by Blake Paulson OCC COO.

02. SEC

Founded in 1934, SEC is an independent quasi-judicial body of the United States, responsible for securities supervision and management in the United States, and is the highest body in the securities industry in the United States. When OCC describe it as “loving mother “, it SEC definitely called” strict father “.

Dialogue SEC, And you’ll remember the mainstream currency XRP. that has been removed from major exchanges 14 January 2020, CFTC chairman Heath Tarbert said in an interview, The third largest encrypted currency XRP can be SEC as a security. Perhaps inspired, SEC finally “live up to expectations” to Ribo.

Messari founder and chief executive Ryan Selkis spoke of SEC, claim that the move seems more strategic than most people think, but it is painfully slow compared to the pace of development in the industry. On the same day, SEC passed the application of the registered GBTC submitted by the grey level, and the grey level resumed to sell its shares to the “qualified” investors, and it was then that the grey level officially began its “hunting moment “.

On February 7, 2020, the SEC Commissioner’s “Encrypted Mom” Hester Peirce said it hoped to provide a three-year security period for legitimate encryption projects, subject to U.S. securities law so that they could pass SEC securities assessments (including Howey). The proposal aims to provide a legal framework for the issuance and sale of tokens under the Federal Securities Act.

On February 25th SEC issued a warning to investors not to engage in illegal ICO and participate in an encryption scam. To combat illegal ICO and IEO, SEC, a list has been compiled covering a range of topics that help investors avoid fraud, including Ponzi schemes using virtual currencies; fraudsters building false encrypted websites and providing false transactions; listed companies that are suspended because they claim to invest in encrypted currencies; background information on dangerous signals of bitcoin and investment fraud; background information on ICO and potential warnings of investment fraud; and fraudsters using false SEC and CFTC claims for digital assets to attract investors.

SEC has been a benchmark in anti-fraud supervision, and the SEC has not yet begun its “harvest “.

SEC voted on March 5th to propose changes to changes to simplify and refine the “patchwork” rules for exempt securities issuance. The proposed rule changes aim to improve the existing “complex and chaotic” framework, making it easier for companies to carry out products that still protect investors. n U.S. securities issuance, including ICO, must be registered in the SEC or eligible for exemption.

SEC temporarily revised its guidelines for regulating crowdfunding on may 5, making it easier for encrypted blockchain companies trying to crowdfunding through crowdfunding platforms to finance during the new crown virus epidemic. Under the adjustment scheme, companies seeking to raise funds through crowdfunding will not need to provide documents, including financial statements, that may be difficult to obtain because of coronavirus barriers. The new revised guidelines and measures are valid until August 31.

6 August, Grayscale announcement submitted to SEC for registration of the etheric trust, If the review passes, It will become the second licensed digital money investment vehicle. Meanwhile, More than 20 institutions have submitted revenue documents to SEC last quarter. Documents show that they all invested in GBTC. owned by grayscale investments Among them, These include established investment firms such as Ark Invest, which manage $4.5 billion in assets, and Horizon Kinetic, which manage $5.3 billion in assets, New investment firms such as Rothschild and Addison Capital are also involved.

Official communication from the SEC on 26 August announced an expansion of its definition of QFII by amending the rules. At the same time, under the influence of QFII regulations, Bitcoin Trust and Ethernet Square Trust, which apply for registration in SEC, can only be opened to QFII. Hester Pierce once said that in the field of encrypted currency, it is open to investors to reclassify. A large part of the investment market is actually token buyers who may not be investors at all.

On 22 September, OCC and SEC first issued a stable currency guide, providing the first detailed guidance on how to deal with encrypted currencies supported by legal tender following the law. OCC clearly points out that the stable currency is a one-to-one stable currency supported by legal tender, excluding algorithmic stable currency. Moreover, SEC indicated that, under federal law, certain stable currency assets may not be securities, but suggested that issuers cooperate with SEC and legal advisers for secondary confirmation. According to the statement, SEC expressed its willingness to issue a letter of inaction, assuring the recipient that no enforcement action would be taken against the company.

On 29 the same month, in a letter to a FINRA executive, the SEC trading and marketing department said exchanges that made every effort to comply with existing regulations would not be subject to sanctions. SEC blow to ICO makes it often seen as an industry demon, digital security products are largely compliant with federal law as a symbolic version of the asset class that has been tightly regulated. With the crackdown on unregulated ICO especially SEC, are preparing for a range of compliant digital security products as the crackdown on unregulated ICO recedes.

4 June 2019, SEC is suing Kik for selling unregistered securities when it launched its ICO in 2017. The proceedings were not known until 21 October 2020, The court has ruled on the matter, Kik will need to pay SEC a fine of $5 million, And inform SEC of any financing for the next three years.

On December 21, SEC accused Rebo of violating investor protection laws while selling XRP and informed Rebo that regulators planned to sue Rebo, CEO Brad Garlinghouse and co-founder Chris Larsen. in a federal civil court soon Reibo immediately responded, saying that the SEC was wrong in law and fact, and said it would defend its rights to the end, but it still set off a wave of XRP and down, and members of the community once said that the XRP would return to zero.

The Southern District Court of New York has set the date for the proceedings on February 22, 2021, in response to the SEC’s charges against Ribo, after which the XRP continued to tumble, offering a price of 0.358 At $45, there is still no sign of warming.

More than two years after SEC announced that bitcoin and ethernet were not securities, u.s. regulators remain silent on the prospect of encryption regulation, and companies, including XRP, may be forced to explore other countries with encryption-friendly laws.

The more obstacles the government sets (one of which is inaction), the fewer opportunities to position the United States as an encryption leader.

03 . CFTC

CFTC was founded in 1974 and is responsible for supervising the u.s. commodity futures, options and financial futures, options markets to safeguard the open, competitive and financial reliability of futures and options markets.

CFTC’s definition of CFTC by former chairman Heath Talbot is that CFTC is helping to build a regulated futures market where investors will be able to “rely on” better “price discovery, hedging, and risk management “.

by allowing cryptocurrencies to enter the CFTC world, investors can better access trusted and regulated financial products, thereby increasing overall confidence in this asset class, which helps legalize digital assets and increase liquidity in these markets, Talbot said.

A public meeting of the CFTC Technical Advisory Committee was held on 26 February 2020 to obtain information on stable currency, encrypted currency insurance, regulatory practices and cybersecurity. CFTC Commissioner Brian Quintenz said that to provide relevant value, through tokenization, the stable currency has the potential to act as a viable liquidity exchange medium and become a powerful promoter of intelligent contracts.

Talbot believes that financial regulation should be based on broader principles, not specific rules. One area where principle-based regulation is usually more appropriate is the development of financial technology, including blockchains and digital assets, Talbot said. The United States must be a world leader in this technology, and excessive use of prescriptive rules may hinder the development of this important market.

CFTC issued a final interpretation guide for the term “actual delivery” specified in the Commodity Trading Act (CEA), which entered into force on 24 June 2020. CFTC unanimously adopted the guide in March,” Retail Commodity Transactions Involving Specific Digital Assets “.

Talbot carefully outlined the distinction between the work of CFTC and its brother regulators, SEC. CFTC is waiting for SEC, to allow more digital asset futures trading, says Mr tabbert.

He said determining whether digital assets are securities was “the sole responsibility of the SEC “. If they are certain that this is not a security, then CFTC can begin to consider it under their own authority. Once people begin to know clearly whether something is a security, they will begin to see more digital asset futures. America’s leading position in technology, especially blockchain technology, is crucial, but he is not satisfied with the current framework.

Comprehensive encrypted currency regulation has been a priority in the final strategy for the next four years, on July 8 CFTC. In its strategic objectives, it committed to developing a holistic framework to promote responsible innovation in digital assets.

CFTC sued 20 entities, including encryption dealers and exchanges, on 2 September. They falsely claim CFTC registration and membership of the National Futures Association (NFA) of the United States. These are mandatory registrations that allow exchanges to provide services related to digital assets, derivatives and foreign exchange transactions in the United States. 10 of these 20 entities allegedly stated on their website that they were registered in CFTC.

These so-called exchanges have never been registered in CFTC or NFA in any capacity, including Bitfx24option.com、 encrypted currency foreign exchange and investment platform Fidelityfxtrade.com and Granttradefx.com that claims to trade and exchange bitcoin, according to the report.

1 October, CFTC charge BitMEX holders, It believes that the agency illegally operates an encrypted currency derivatives trading platform and violates anti-money laundering regulations. In an interview, Hester Pierce said, DOJ and CFTC’s latest charges against BitMEX have raised concerns in the encryption industry about U.S. anti-money laundering (AML) and understanding your customer (KYC) regulations, The message to the encryption industry is that some products and services involve American users that require enforcement of American law. Pierce also discussed the apparent conflict SEC the Bitcoin Exchange Fund (ETF), It is not fair to investors.

CFTC issued new guidelines on the market for encrypted derivatives that hold customer funds on October 22nd, advising them to hold customer funds very carefully. the specific provisions of the guide limit the location where “futures commission merchants “(FCM) can deposit customers’ virtual currency, including” banks, trust companies, other FCM or clearing organizations that liquidate virtual currency futures “. Moreover, CFTC warns FCM, they need to keep any such deposits in accounts clearly marked as customer funds and must not compensate for losses in another account with proceeds from one account.

On Jan.22, U.S. CFTC President Robert Talbot, a cryptocurrency-friendly president, stepped down as well as a widely talked-about candidate, with foreign media reporting Chris Brummer. the most promising candidate is Georgetown University law professor and former CFTC commissioner, nominee

Brummer, like Gary Gensler, knows a lot about encryption. He has been CFTC testifying in recent years on issues such as cryptocurrencies and central bank digital currencies, in addition to hosting the financial technology week.

04. Summary

As a matter of fact, the classification of encrypted digital money by US regulators at this stage is still unclear, which indirectly leads to the “XRP” dilemma.

Before the March 2020 issue of the Encrypted Digital Currency Guidelines, the United States had a large number of major law enforcement regulators for the regulation of encrypted digital currencies, including the United States Commodity Futures Trading Commission (CFTC), the Financial Enforcement Unit of the United States Treasury (FinCEN), the Federal Trade Commission (FTC), the State Taxation Bureau (IRS), the United States Consumer Financial Protection Agency (CFPB) and the Monetary Authority (OCC). At the same time, they will inevitably produce friction.

In 2021, as the Biden administration reshuffled and wall street entered on a massive scale, we seemed to be moving from cryptocurrency leaders to monopolies, and where would the future of encrypted currency compliance go? It may be difficult to predict, but any encryption policy adopted by the United States will certainly cause a lot of shocks in the encrypted world.

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