Original author: Coin Center
Original translation: GaryMa Wu said blockchain
In the recent elections, cryptocurrency received significant attention, and many are speculating whether the new government and Congress will be friendly towards cryptocurrency. In short, we expect that policies may improve in certain areas while others will still face challenges. We believe there is a possibility of clearer rules in the fields of securities and banking regulation, such as rules for centralized secondary markets and centralized stablecoin issuers.
In terms of anti-money laundering, tax reporting, and sanctions, the outlook is less clear. Here are our thoughts on these issues and a preliminary analysis of future opportunities and challenges.
How to view cryptocurrency-related issues during a government transition
Cryptocurrency policy issues can be broadly categorized into two areas: regulatory issues (tax reporting, BSA/AML, sanctions) and investor protection issues (SEC, CFTC, banking). Achieving good policy in one category does not imply similar success in the other. The underlying motivations behind these two categories of policy are different (protecting investors vs. identifying and stopping illegal fund flows), and the political motivations and opportunities for coalition action among legislators also differ in each area.
Similarly, the cryptocurrency ecosystem can be divided into two major categories: centralized businesses (custodial wallet service providers, centralized exchanges, trusted issuers) and developers and users of decentralized infrastructure (protocol developers, non-custodial wallet and application developers, and non-intermediated users who utilize these protocols and applications).
Coin Center aims to promote good policies across all dimensions, but our core mission is to defend the rights of decentralized and peer-to-peer tool developers and users. In the realm of investor protection or regulation, any overly aggressive regulatory system could threaten developers and users. However, threats from the regulatory sphere have appeared to be more profound in recent years.
Below is a chart of past and potential future policy actions to help you understand this framework:
You may notice that the box in the lower right corner appears particularly weighty compared to the other sections. This may reflect our focus of concern. Coin Center's mission focuses on the code publishing rights of decentralized infrastructure developers (involving the First Amendment) and opposing unreasonable regulatory demands (involving the Fourth Amendment). That box is the intersection of these two major issues. Although there may be some bias, this area has indeed been more controversial than any other sector over the past four years. Various explanations can be offered for this, such as from the public perspective and news cycle, where some politicians incorrectly or opportunistically link the tragedies of global and foreign policy to cryptocurrency (such as Hamas fundraising and attempts by Russian oligarchs to evade sanctions). Additionally, in building political coalitions, the left and right, although rarely in agreement, sometimes find common ground on national security and regulatory issues.
What is the biggest threat?
In recent years, the freedoms of individual cryptocurrency users and developers have faced serious threats. We have seen the SEC increasingly overreach, with rule revisions defined by exchanges gradually involving individual developers and users directly, as well as enforcement actions against wallet providers (such as ConsenSys's Metamask and Coinbase Wallet). Meanwhile, regulatory issues have become increasingly prominent, including 6050 I reporting obligations, Tornado Cash sanctions, broker reporting obligations, and lawsuits against non-custodial developers for unauthorized fund transfers. At the same time, in Congress, we have been opposing legislation like CANSEE and DAMLA, which attempt to impose unreasonable regulatory obligations on non-custodial developers.
Still a tough nut to crack
There are three major threats that require special attention: (1) 6050 I, (2) Tornado Cash sanctions, and (3) lawsuits for unauthorized fund transfers. First, under the context of 6050 I, we already have ongoing litigation, in which we believe the IRS's requirement to mandatorily report personal information of cryptocurrency recipients exceeding $10,000 violates constitutional provisions regarding information disclosure without a warrant. Second, regarding Tornado Cash sanctions, we similarly have ongoing litigation claiming that the sanctions law does not grant the Treasury the authority to prohibit Americans from using immutable smart contracts (neither foreign persons nor their property). Third, we are shocked by the lawsuits initiated by the Southern District of New York court against developers of non-custodial software tools (such as Tornado Cash and Samurai Wallet) for unauthorized fund transfers, and we will support the defendants in these cases as much as possible. While the Department of Justice may change under the Trump administration, it may not drop these prosecutions due to its political independence.
Reasons for optimism
While not delving deeply, the assertion that the new government will be more friendly to centralized businesses in the United States, especially regarding investor protection issues, seems credible. This is good news, as intermediary services and efficient capital formation are crucial for expanding the appeal of cryptocurrency, particularly for those less technically skilled. However, what about Coin Center's core concern regarding the impact on true decentralized tools and services developers and users?
From an institutional perspective, President Trump's general support for cryptocurrency and his choices for SEC and Treasury appointments may mean that some controversial rulemaking will be frozen or even discarded. This is a consistent positive signal for us, as the SEC's redefined exchange rules and the IRS's broker rules for non-custodial developers have always been two swords hanging over our heads.
The new government's willingness to scale back overly aggressive sanctions and anti-money laundering policies remains uncertain. Nevertheless, we hope that if it gradually becomes clear that even under a friendlier SEC, harsh regulatory policies will drive innovators out of the United States, hinder development, and deprive ordinary Americans of the benefits of these technologies, we might make some progress. These policies have minimal actual effect on stopping criminals and terrorists.
We are also optimistic that Congress may play a larger role in pushing these regulatory issues forward. Significant work has already been done, including legislators sending critical letters regarding the implementation of 6050 I, Tornado Cash sanctions, and lawsuits over unauthorized fund transfers. Legislation such as the Blockchain Regulatory Certainty Act will provide legislative solutions to address unauthorized fund transfer lawsuits, and we are also preparing to find bipartisan pathways for its passage.
We look forward to cooperating with the new government on this issue and cautiously optimistic that if our arguments are compelling enough, we will receive fair consideration. Throughout history, the constitutional rights of the United States, especially respect for freedom of speech and vigilance against unreasonable searches and seizures, should ensure that this becomes the best place to build and use cryptocurrency and open blockchain networks. It is important to clarify that 'supporting cryptocurrency' does not only mean choosing more friendly institutional leaders or implementing more business-friendly regulations, but also involves something deeply rooted in American culture: defending privacy and freedom of speech during the toughest times when national security threats, crime, and terrorism briefly overshadow our enduring pursuit of freedom, privacy, and openness. Now is the time to take action for strong legal precedents to protect these technologies and engrave the benefits they may bring into the nation's future.
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