As the US and EU fight over crypto regulation superiority, is regulation even viable?


Crypto regulation is the hot topic of 2022. Fears of a global crypto ban appear to have almost completely subsided as adoption It takes us past the point of no return. Banning cryptocurrencies is now practically impossible. However, the lack of an upcoming blanket crypto ban does not mean there will be no change.

Most, if not all, crypto projects are left out current regulatory frameworks or are subject to inconsistent policies targeting existing financial assets such as traditional values.

Is regulation even possible?

Unlike fiat investments, there are no protections for people who invest in cryptocurrencies. For example, if a bank goes bankrupt in the UK and you lose your money, the FSCS I’ll pay you £85,000 per company. In the US, the FDIC standard deposit insurance is $250,000 per depositor, per bank. The European equivalent, EDIS, pay up to €100,000. Given today’s world of social engineering, it seems sensible that we should accept some regulations to allow governments to issue investor protection.

However, there is a real question as to whether we need such help from governments. Perhaps it should be up to the crypto community to create these systems?

projects like mutual bond they offer coverage for contract errors, economic attacks, including Oracle failures, and government attacks for around 2.6% per year. Do we need traditional solutions for disruptive technologies? Also, is it possible for governments to create fundamental and impactful regulations for cryptocurrencies? It seems that smart contracts were born for this, and a global cross-chain crypto DAO would be my preference over traditional governments where most politicians don’t even understand what blockchain means. I would like to see a cross-chain DAO, somehow secured by a trustless voting system, issued to the validators of the world’s leading crypto projects.

I have no idea how this would work in a non-exploitable way, but there must be a possible world where we can achieve this. In this world, the crypto community could vote through the blockchain to ensure safe and secure deposit practices.

If a chain were to be hacked, the DAO could pay out of its cross-chain treasury to pay investors. Maybe it’s a dumb idea. Message me on Twitter if you think it is and tell me why. I’d love to explore alternatives to government regulation with you.

Regulation and globalization

It is unlikely that the crypto community can, or will be allowed, to regulate itself any time soon. Therefore, the need for some form of government regulation is inevitable. When new technologies are allowed to grow exponentially without formal regulation, we can potentially have socially devastating consequences. However, this is not just a new technology; this is a single global monetary system.

Whoever controls regulation potentially controls the future financial system as a whole. Credit Suisse says that we are witnessing the birth of a new world monetary order.” They postulate that a digital renminbi will be much stronger in the coming months due to the current global economic crisis.

Crypto is not going away and shows the potential to replace the current system. This creates a new battlefield. Controlling crypto regulation may be the only way centralized governments can maintain their control over the global economy. Globalization has three facets, economic, political and cultural. I doubt that few advocate a single culture and political system for the entire planet. Why then do we settle on a single economic system?

Economic globalization has made trade more accessible, services more efficient and outsourcing more convenient. However, the US, EU and Chinese agendas control most of the system. Crypto will enable all the benefits of economic globalization without centralized control. Nobody likes to lose control, especially the global superpowers.

The United States as a leader in crypto regulation

in Biden’s recent executive order, the US has made it clear that it wants to be the world leader in regulating cryptocurrencies. Speaking with Moe Vella, former senior adviser to Joe Biden, I asked him some pointed questions about where the US stands on regulation.

Vela believes that with current inflation levels and Russian aggression, Biden felt the need to examine market volatility, anonymity, decentralization and lack of protection. Vela agreed that cryptocurrencies are “here to stay”, and now there’s a need “encourage innovation” while “mitigate risks for investors”.

The main objective of the order is “determine a clear delineation of responsibilities, powers and regulatory oversight among federal agencies with the scope of cryptocurrency”, as the SEC and CFTC have been fighting over who should have regulatory control over digital assets to sometimes.

Asked directly if the US wants to become the leader in crypto regulation, he stated:

“At all costs, over-regulation should be avoided, but reasonable and unbiased regulations should be adopted, including centralization, as long as they do not stifle innovation and protect vulnerable investors…some corporate (not necessarily government) centralization and transparency in transactions and exchanges. It would contribute to a safer, healthier, more secure and more stable industry and world.”

The executive order established the need to protect global financial stability, promote US leadership in economic competitiveness, and strengthen US leadership in the global financial system. The United States believes that it is in an ideal position to lead the global financial system and will not like the concept of Bitcoin replacing the dollar as the main reserve currency. Since the US has state and federal laws, this article would take two hours if it outlined the entire regulatory history of cryptocurrencies in the US.

The SEC still not approved a spot Bitcoin ETF years after the first application. However, crypto futures ETFs are now traded within the country. The SEC sees cryptocurrencies as a security and the CTFC sees them as a commodity. Part of the role of the executive order is to unite these opposing viewpoints. the wavy court case with the SEC will likely be the next catalyst for the US-led regulatory fate of cryptocurrencies.

Europe’s claim to lead cryptocurrency regulatory policy

In Europe, the crypto regulatory charge comes in the form of the Markets in Crypto Assets report. The report has gotten a lot of press due to a now-deleted amendment. It would have banned the trading of proof-of-work coins within the EU Head of Strategy and Business Development in unstoppable financePatrick Hansen follows the EU crypto regulation and closely described the purpose of MiCA as:

“Primarily, the harmonization of rules across the EU and the establishment of clear guidelines and requirements for companies.”

He also believes that the EU’s objective is “lead in terms of crypto regulation and setting global standards.”

The report, which is currently pending in the European Parliament, would establish legal definitions for cryptography and associated blockchain technology. This should be supportive of crypto businesses rather than restrictive for the most part. Having clear definitions allows you to know the rules of the game you are playing. There is, however, more clauses in the 60-page document that many in the crypto community will disagree with regarding Defi and KYC.

Interestingly, the report states that the legislation should not regulate any central bank or government under any of the proposed bills. They are of course subject to existing regulations, but some may wonder if the rules are not good enough for the government and the banking sector, why are they being imposed on the rest of Europe?

I contacted all members of the EU Parliament involved in the MiCA report with no response. However, alan chiuCEO and Founder of red boba, a next-generation Ethereum Layer 2 Optimistic Rollup scaling solution, recently gave us his thoughts on the EU’s proposed approach to crypto regulation.

“We are happy to see the signal from the EU that it is open to continued innovation in the blockchain space. The European Parliament has now positioned itself to lead the maturation of these technologies, promoting access and opportunity for billions of people around the world.”

George HarrapCo-Founder of step financeSolana’s cover, took a less delicate approach calling the concept of a proof-of-work ban “stupid,”

“These people tried to ban a mathematical equation, something as stupid as this should be treated as such and it’s a good thing they scrapped it, what does E=mc^2 keep banning? if anything, the vote should have been even stronger in favor of scrapping this bill.”

Patrick Hansen closely follows the EU crypto regulation. He believes that the aim of the EU is “lead in terms of crypto regulation and setting global standards.” When asked if the EU is capable of doing this, Hansen commented:

“The EU is one of the most important economic areas in the world and it will have a huge impact on how the other two countries approach the complex effort of regulating cryptocurrencies, but also how crypto companies establish their legal frameworks.”

Central bank digital currency setup

In a world where CBDC being explored by almost all central governments, the regulatory frameworks will now act as a precursor to what we can expect from government-backed digital assets. If the regulation does not apply to CDBCs, they could function as a fiat. Today, money is digital for the most part anyway. If a CDBC meant that every citizen acted as a network validator and voted on how the monetary system is run, that could be interesting.

However, this is unlikely. Most likely, we will see the potential of government-issued smart contracts. Imagine receiving your paycheck only to have it automatically removed from your CBDC wallet via a smart contract issued to pay taxes. In an ideal world with a fully competent and efficient government, smart and programmable money could be a utopia with no one wanting anything. However, governments are far from it in my experience with HMRC.

In my opinion, it would be completely irresponsible to hold onto cryptocurrencies any longer, as it is clear that blockchain technology can push humanity forward.