Blockchain Regulation Should be a Priority of Biden’s Economic Policy
By: Joseph Clark
Tags: Bitcoin, Regulation, Biden, Cryptocurrency, Economic Policy

The United States is going back into lockdown mode as the number of coronavirus cases spikes just as another brutal winter is about to set in. According to the latest statistics, the number of daily coronavirus infections surpassed 100,000 in early November to currently hover at 150,000, as states brace for life as we know it to come to a screeching halt once again.

As a result, pro sports teams are turning away fans, and travel plans are getting placed on hold, just as the holidays are approaching. And now that a second wave of the pandemic is rearing its ugly head, the economy is bracing what could become a double-dip recession.

It is a scenario that Dallas Fed President Rob Kaplan has warned about, and while it’s not a foregone conclusion, with people hunkering down once again, negative growth in the economy has become a real threat. Either way you look at it, the next six months are expected to be “very challenging,” according to Kaplan, despite the emergence of COVID vaccines in the pipeline.

All of the uncertainty and instability has pushed investors and mainstream America straight into the arms of bitcoin. The leading cryptocurrency has seen its price increase by nearly 50% in November alone as it barrels toward USD 20,000 to potentially set a new all-time high by year-end.

Meanwhile, as the United States prepares to transition to a new president, Democratic candidate Joe Biden, the cryptocurrency community prepares for an administration in which bitcoin is going to be too important to ignore.

Not only that, but there is also change afoot at the U.S. Securities and Exchange Commission, the regulator that fields applications for a bitcoin ETF, as Jay Clayton prepares to step down. While it is unclear who his replacement will be, the crypto community is hopeful that it will be someone who will not stand in the way of tech innovation.

Bitcoin Boss

Bitcoin has emerged as a safe-haven asset during an otherwise tumultuous year. The benchmark interest rate is hovering near zero with no indication of rising anytime soon, leaving investors with little recourse for yield in the traditional financial markets. Stocks have been rallying lately, but it has been a rocky year. And their returns pale in comparison to that of the cryptocurrency market.

In fact, bitcoin has been the asset that investors have flocked to during the most precarious times this year as the leading cryptocurrency charted its own path, trading in an uncorrelated manner to equities. Bitcoin’s returns have also far outpaced those of commodities, including rival safe-haven asset gold as well as oil even after not being left unscathed from the market crash in March. Here is a breakdown of the year-to-date returns by asset as per TradingView as of Nov. 25:

Bitcoin: 165%

Gold: 19%

Dollar Index: -5%

Crude Oil: -25%

With bitcoin once again grabbing the spotlight, it’s not surprising that demand for Bitcoin ATMs, machines by which users can purchase BTC with cash, credit and debit cards, is rising, as people look for quick and easy access to the most popular cryptocurrency. In fact, more Bitcoin ATMs have been installed over the last few months than has been the case in the last half-decade combined, according to Coin ATM Radar.

“People are looking at Bitcoin as a safe-haven asset,” said CoinFlip COO Ben Weiss. CoinFlip, the world’s largest Bitcoin ATM operator, has already rolled out 1,000 machines across the US that are supported by 10 major cryptocurrencies.

For these reasons and more, it is imperative that President elect Biden make cryptocurrency regulation a key part of his agenda for the next four years. Americans are hearing about bitcoin from mainstream financial media outlets and seeing the types of returns that cryptocurrencies are delivering while other assets remain in the doldrums.

As more retail investors move into the space to capture some of the upswing in the price, a regulatory framework that until now has largely eluded the industry must be implemented for consumer protection. The only thing that might be worse is hurrying to pass rushed legislation for the sake of doing so, which Coinbase CEO Brian Armstrong warned that U.S. Treasury Secretary Steven Mnuchin could have up his sleeve.

Otherwise, for example, regulators run the risk of having illicit actors — including unlicensed Bitcoin ATM operators — take advantage of vulnerable Americans. Not only does this put the public at risk but it also threatens to taint the perception of an industry that has fought so hard to take its reputation back.

To be clear, most Bitcoin ATM service providers, like CoinFlip, have taken it upon themselves and built their business models in compliance with anti-money laundering laws already on the books, including the U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN.

Otherwise they would be breaching multiple laws, as was the case for numerous unlicensed Bitcoin ATM operators in Germany, where the Federal Financial Supervisory Authority (BaFin) was forced to shut those companies down, including ShitCoin Club and Coin Fellows. The United States has also reportedly lassoed in more than a dozen unauthorized Bitcoin ATMs in the state of California.

Nonetheless, the private sector continues to bridge the gap where regulation falls short in the United States. And while it is helping, the US still risks losing top tech talent to Asia and Europe where policymakers are confronting blockchain regulation head-on. Blockchain is already considered one of the top-three rising skills in the Asia-Pacific region, including Singapore, Hong Kong and Japan.

CoinFlip is doing its part to keep the United States relevant for blockchain technology, having advocated for regulatory change and clarity and worked alongside state legislators in California and New Jersey with the aim to boost businesses and protect consumers. In particular, CoinFlip along with the Blockchain Advocacy Coalition has supported pending crypto legislation AB 2150 in California, which if passed into law would provide blockchain founders with more regulatory clarity on the industry.

Blockchain Influence

Some have said that bitcoin will thrive no matter who was elected president. And maybe so. But with 2021 right around the corner, the blockchain is only going to grow in influence. That is why Mr. Biden should make it a priority to establish clear and concise blockchain regulation for the sake of the United States having a shot at competing with Asia and Europe — both of which are already ahead — as well as protecting consumers. US companies are holding the line in the interim, with companies like CoinFlip hiring 100 people in the last two months alone with plans to keep up the same pace.

Meanwhile, the recent nomination of former Fed Chair Janet Yellen as Treasury Secretary could be a step in the right direction. While she may not have caught bitcoin fever, she is well aware of the popularity of the cryptocurrency and has acknowledged the potential of blockchain technology. It’s a start.