A recent bill that was tabled by Congressman Paul Gosar (R-AZ) suggested that the rules and regulations surrounding cryptocurrencies in the US require categorisation in order for the different facets of the ecosystem to be understood and codified. This bill looked to be a cryptocurrency-positive one as it would provide a regulatory framework for the industry in the USA.
The US has been a country a little on the backfoot when it comes to cryptocurrency innovation — despite its keen and vested interest across individuals, retails, and enterprises. However, the viewpoint of the Senate has been one of scepticism and suspicion, which has, in turn, limited the growth of innovation in the US for the industry.
The attempted launch of Facebook’s Libra project demonstrates the low level of tolerance, and the ambiguous regulation, of the cryptocurrency space in the US, and why this new Bill would be so welcomed.
However, there is a sticking point in the bill that has been noted by ardent believers in cryptocurrency who still hold privacy and anonymity in transactions in high regard. Under section 6, the act describes:
“The secretary of the Treasury, acting through the Financial Crimes Enforcement Network, shall issue rules to require each cryptocurrency (Including synthetic stablecoins) to allow for the tracing of transactions.”
Essentially, this would allow for businesses using cryptocurrencies, under this bill, to have access and information to the spending of their clients and the transactions they make. Some are seeing this as an affront to financial privacy, however, the act describes it differently.
Lack of financial privacy or part of the deal?
The attraction to the likes of Bitcoin, and even other more privacy-focused coins, is that there is a higher degree of financial privacy when it comes to making transactions. However, this privacy is also a sticking point for regulators as it allows for illicit and illegal transactions to go unmonitored.
The Cryptocurrency Act of 2020 appears to be trying to appease regulators and their fear of the anonymous nature of cryptocurrencies while sacrificing the very private nature of cryptocurrencies in general.
“However, the act goes on to describe the tracing of transactions as: “in a manner similar to that required of financial institutions with respect to currency transactions.”
The debate is weather people will be happy with cryptocurrencies falling further under the traditional financial regulatory umbrella and treated like other digital transactions for the sake of legitimization, of if this regulatory framework is too limiting to an aspect of cryptocurrencies that has long been an established pillar of the ecosystem.