[Insight] Digital Asset Regulations for Transparency’s Sake
Tags: Digital Asset, Bithumb, Transparency, Regulation, Insight

The price of Bitcoin is continuing its skyrocketing, surpassing its highest records by reaching nearly USD 20,000 worth. For that, the political and policymaking authorities are raising their voices, crying out for regulation, just like they did in the past. As currency or assets, it is indeed true that those who are not accepting Bitcoin or other digital assets as mainstream are feeling uncomfortable with such skyrocketing of Bitcoin.

However, according to many experts, it is obvious that the speculation situation for the current rally of Bitcoin is clearly different from the situation in 2017 to 2018. In 2017, there was nothing more than a simple expectation for rising. But now, the result was brought by many related factors, such as the increase of non-contact demands due to the new COVID-19 pandemic, rising of the alternative assets caused by the falling monetary value, and high attention from institutional investors and payment service firms.

Thus, ironically the concerns of the financial supervisory authorities are even intensifying. The sky-soaring price of assets has always been an issue for the supervisory authorities, so they need to plan something for the preparation. But the current price rising is occurring due to various factors, and many of the companies are using this as their advantage. So regulating the demands blindingly could not be the option in this case.

The statement by Brian Brooks, the chief officer of the Office of the Comptroller of the Currency (OCC), in an interview with CNBC a few days ago, is showing such concerns of the authorities. In this interview, Brooks said, “We will announce an exact regulation within 6 to 8 weeks in order to improve the transparency of Bitcoin and other digital assets.” At the same time, he also said, “Nobody’s going to ban Bitcoin” and added, “there will be good news related to Bitcoin,” as if he understands the term regulation can be unsettling to everyone.

What is interesting is that OCC is a supervisory authority that has been separated from the U.S. Department of the Treasury and managing various commercial banks, local banks, savings banks, and foreign bank branches. In summary, that means OCC is an authority that stabilizes the financial system of the U.S. through integrated management of financial firms that are offering banking services. The fact that OCC spoke of regulation means that Bitcoin has already rooted deep into the financial firms and financial system itself.

As a well-known, the iconic banks of the U.S., such as JPMorgan Chase, have already launched an exclusive department related to blockchain digital assets and preparing to issue their own stablecoin. Even Nomura Securities and Goldman Sachs have also step foot in the field of Bitcoin consignment. Also, Paypal stated that they are going to utilize digital assets as a payment method for online shopping, starting from the trading system for digital assets. Such movements must have led OCC to make a preparation.

The chief officer Brooks said, “The regulation we are focusing on is not the one for killing digital assets, but for managing them properly,” and added, “We don’t need all the 50 regulations, but it is necessary (for authorities) to know what we are going to allow exactly.” That means it will be a regulation for clarifying what is possible and what is not, not the one for prohibition.

Especially, he said that “Banks can make direct payment through blockchain network within the boundary where the authorities deemed possible.” In return, he emphasized that “it is important to prevent illegal actions, such as money laundering or terror supports, from the beginning by developing networks related to Bitcoin or other digital assets.” That sounds like that they are going to announce a clear direction of regulation for crypto banks.

The chief officer Brooks, who has been an acting leader of OCC since June, is a digital asset-friendly person and had served as a chief legal officer at Coinbase. As a chief officer, Brooks showed somewhat forward-looking movements like allowing digital asset consignment for banks in July and allowing preparation fund for companies preparing for stablecoin issuance in September. Due to this, some members of the House of Representatives showed their discontent through a letter sent to chief officer Brooks, saying, “OCC is too inclining towards digital assets.”

And as if some side effect, some members of the House of Representatives, including Rashida Tlaib, have caused some tension to the market by proposing a bill that forcing stablecoin service providers to acquire authorizations and licenses for issuing currencies. If the providers need to get authorization from the Federal Reserve System, Federal Deposit Insurance Corporation, OCC, etc., the risk management system they have to prepare will be tremendous. Since CENTRE Consortium (by Circle and Coinbase), Gemini, Paxos, etc. are also operating without authorizations and licenses for issuance, the impact of the pass of the bill might cause over the market could be quiet significant.

But there are also other members of the House of Representatives, such as Tom Emmer, who are opposing the severe regulations. Since the president-elect Joe Biden, who will take office the next January 20, also does not show any negative stance toward digital assets, it seems highly possible that the bill will be disposed of or relaxed to some degree. It also appears that there will be continuous threats by the regulatory authorities towards Bitcoin and other digital assets. However, we believe that the current change of trends will create an environment that regulators cannot take their actions so lightly.