Author | Coin Center
Translation | GaryMa 吴说区块链
In the recent elections, cryptocurrencies received significant attention, and many are speculating whether the new government and Congress will have a friendly attitude towards cryptocurrencies. In short, we expect that in certain areas, policies may improve, while others will still face challenges. We believe that clearer rules could be established 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. Below are our thoughts on these issues and a preliminary analysis of future opportunities and challenges.
How to view cryptocurrency-related issues during government transitions
Cryptocurrency policy issues can generally be divided into two categories: regulatory issues (tax reporting, BSA/AML, sanctions) and investor protection issues (SEC, CFTC, banking). Achieving good policy in one category does not mean the same can be accomplished in the other. The underlying motivations for these two types of policies differ (protecting investors vs. identifying and stopping illegal capital flows), and the political motivations and opportunities for coordinated action among legislators in each area also vary.
Similarly, the cryptocurrency ecosystem can also be divided into two main 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 of 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 fields of investor protection or regulation, any overly aggressive regulatory regime could threaten developers and users. However, the threats from the regulatory realm have appeared to be more far-reaching 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 heavy compared to other sections. This may reflect our focus of attention. Coin Center's mission centers on the code release rights of decentralized infrastructure developers (related to the First Amendment) and opposing unreasonable regulatory requirements (related to the Fourth Amendment). That box is indeed the intersection of these two significant issues. While there may be some bias, this area has certainly been more contentious than any other over the past four years. There can be multiple explanations for this, such as the perspective of the public and the news cycle, where some politicians mistakenly or opportunistically link the tragedies of global and foreign policy to cryptocurrencies (such as Hamas fundraising, Russian oligarchs attempting to evade sanctions). Moreover, in building political coalitions, although it is rare for the left and right to agree, they 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 in its enforcement, with its proposed revisions to exchange-defined rules increasingly directly affecting individual developers and users, as well as its enforcement actions against wallet providers (such as ConsenSys's Metamask and Coinbase Wallet). At the same time, regulatory issues are becoming more prominent, including the 6050I reporting obligation, Tornado Cash sanctions, broker reporting obligations, and lawsuits against unlicensed transfers by non-custodial developers. Meanwhile, 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 deserve special attention: (1) 6050I, (2) Tornado Cash sanctions, and (3) lawsuits regarding unlicensed money transmission. First, in the context of 6050I, we already have ongoing lawsuits, and we believe the IRS's requirement to force the reporting of personal information of recipients exceeding $10,000 in cryptocurrency violates the constitutional provision against information disclosure without a warrant. Second, regarding Tornado Cash sanctions, we also have ongoing lawsuits asserting that the sanctions law did not empower the Treasury to prohibit Americans from using immutable smart contracts (neither foreign nor their property). Third, we are shocked by the unlicensed money transmission lawsuits filed against developers of non-custodial software tools (such as Tornado Cash and Samurai Wallet) in the Southern District of New York, and we will support the defendants in these cases as much as possible. Although the Department of Justice may change under the Trump administration, due to its political independence, it may not abandon these prosecutions simply because of a change in government.
Reasons for optimism
While not delving deeply into the issue, the claim that the new government will be friendlier towards centralized businesses, especially regarding investor protection, seems credible. This is good news as intermediation services and efficient capital formation are crucial for expanding the appeal of cryptocurrencies, especially for audiences that are less technologically savvy. However, what about the impact on true decentralized tool and service developers and users, which is Coin Center's core concern?
From an institutional perspective, President Trump's general support for cryptocurrencies and his choices for SEC and Treasury appointments may indicate that some controversial rule-making will be frozen or even abandoned. This is a consistently positive signal for us, as the SEC's redefined exchange rules and the IRS's broker rules concerning non-custodial developers have always been two swords hanging over our heads.
The new government's willingness to cut back on overly aggressive sanctions and anti-money laundering policies remains uncertain. Nevertheless, we still hope that if it gradually becomes clear that even under a friendlier SEC, strict regulatory policies will continue to drive innovators out of the United States, hinder development, and deprive ordinary Americans of the benefits these technologies could bring, some progress may be made. The actual effectiveness of these policies in stopping criminals and terrorists is minimal.
We are also optimistic about Congress potentially playing a larger role in advancing these regulatory issues. A lot of work has already begun, including lawmakers sending critical letters regarding the implementation of 6050I, Tornado Cash sanctions, and lawsuits regarding unlicensed money transmission. Legislation like the Blockchain Regulatory Certainty Act will provide a legislative solution to the issue of unlicensed money transmission lawsuits, and we are also prepared to find bipartisan ways to support its passage.
We look forward to collaborating with the new government on this issue and are cautiously optimistic that if our arguments are persuasive enough, they will receive fair consideration. Throughout history, the constitutional rights in the United States, particularly the respect for free speech and vigilance against unreasonable searches and seizures, should ensure that this place becomes the best location for building and using cryptocurrencies and open blockchain networks. It is important to clarify that 'supporting cryptocurrencies' does not just mean choosing more friendly agency leaders or implementing more business-friendly regulations, but also involves something deeply rooted in American culture: defending privacy and free speech in the most difficult times when national security concerns, crime, and terrorism briefly overshadow our enduring pursuit of freedom, privacy, and openness. Now is the time to take action, striving for strong legal precedents to protect these technologies and engrave their potential benefits into the future of the nation.