As the market cap of cryptocurrencies has grown to the point where mainstream financial industry players are jumping aboard the blockchain bandwagon with greater fervor than ever, and NFTs make headlines (and paydays) for famous and obscure celebrities alike, regulators in Beijing and Washington are ramping up their efforts in the space, each in its own way. In China, the moves are headline-grabbing, interventionist, and as frequently with China, perhaps less than meets the eye. Meanwhile in Washington, the approach is shambolic, incrementalistic and, as always in Washington, heavily influenced by the industry subject to the regulation. But both paths lead to greater government control over the cryptocurrency industries.

On Friday, September 24, 2021, China’s central bank announced that all transactions of crypto-currencies and cryptocurrency mining are illegal, intensifying the country’s crackdown on cryptocurrencies such as Bitcoin. Friday’s statement is the latest and most comprehensive effort yet in China’s commitment to halt cryptocurrency activity in the People’s Republic.

In its announcement, the People’s Bank of China (PBOC) stated that overseas exchanges are barred from providing services to China-based investors and that cryptocurrencies, including Bitcoin, are not fiat currency and cannot be circulated. The PBOC justified its action, stating that such activity “seriously endangers the safety of people’s assets.”

Continue Reading A (Crypto) Tale of Two (Capitol) Cities: Beijing and Washington Grapple with a Growing Industry in Their Own Unique Fashions

Federal Reserve Board (FRB) Chair Jerome H. Powell announced on Thursday May 20, 2021, the Federal Reserve plans to publish a discussion paper this summer that will explore the possibility of issuing a U.S. central bank digital currency (CBDC).

According to Powell in a video message, the Federal Reserve has been carefully monitoring recent technological advances that are driving rapid changes regarding payment methods, and has been exploring ways to refine the FRB’s role as a core payment services provider and as the issuing authority for U.S. currency.

In particular, the Federal Reserve is exploring the development and issuance of central bank digital currencies, or CBDCs. The term “central bank digital currency” is not well-defined, and various implementations have been proposed, but in essence, a CBDC is a type of central bank liability issued in digital form. Based on its implementation, a CBDC could be designed for use by the general public as a digital representation of fiat currency.

Continue Reading Federal Reserve Dives Deep into Central Bank Digital Currencies

Technology facilitates legal and illicit transactions alike. Advances in payments technologies and cryptocurrencies such as Bitcoin, Monero, and Zcash allow criminal enterprises to dissect, route, and reaggregate small transactions to evade detection by regulatory and enforcement agencies. This is particularly true with international transactions where, for example, the exchange from cryptocurrency to fiat currency takes place outside U.S. financial supervision.

To address these challenges, the Federal Reserve Board and the Financial Crimes Enforcement Network (FinCEN and together, Agencies) issued a joint notice of proposed rulemaking (Proposed Rule) on October 23, 2020, to amend the Recordkeeping Rule and Travel Rule under the Bank Secrecy Act (BSA) and to define “money” as it applies to both rules. Specifically, the Proposed Rule:

  1. Lowers the threshold for collecting, retaining, and transmitting information on international funds transfers and transmittals of funds from $3,000 to $250. The threshold for domestic transactions would remain unchanged at $3,000; and
  2. Defines money to extend the Recordkeeping Rule and Travel Rule to digital assets used for legal tender and convertible virtual currency (CVC).

Written comments on this proposed rule are due November 27, 2020.

Continue Reading BSA Alchemy: While Lowering the Recordkeeping and Travel Threshold, FinCEN and the Fed Turn Virtual Currency into Real Money

The Subcommittee on Capital Markets, Securities, and Investment held a hearing, “Examining Cryptocurrencies and ICO Markets,” this past Wednesday, March 14, 2018.

The stated goal of the hearing was to achieve greater regulatory clarity in the cryptocurrency and ICO markets, especially as these markets continue to grow and attract attention from investors and enterprises in pursuit of capital. Members of the subcommittee indicated that achieving this regulatory clarity would be critical to ensuring that investors are protected without unduly stifling innovation.

Continue Reading House Subcommittee on Capital Markets, Securities, and Investment Holds Hearing Examining Cryptocurrencies and ICOs