About the authors: JAmil N. Jaffer is the founder and executive director of the National Security Institute at George Mason University. He previously served as a senior executive at a publicly traded cybersecurity company and in national security roles. John Poulson is Head of Public Policy and Government Relations at GMU’s National Security Institute. He previously served in the US Treasury Department as Special Assistant to the Undersecretary for International Affairs.
This summer has seen chaos in the cryptocurrency market, with major corrections in digital currencies and major crypto institutions. Many observers of this scenario, such as former Clinton-era Labor Secretary Robert Reich, believe these events highlight the need for extensive new regulation of this nascent market, including the potential treatment of crypto. -currencies as negotiable securities. In our view, now is exactly the wrong time to impose massive new securities-type regulations. The result would be to strangle this new industry or worse, push it overseas.
The right approach is to recognize the most recent correction for what it is: the proper – albeit belated – functioning of the markets to deal with broad-based overextension. The crypto market can benefit from some general regulatory guidelines and basic safeguards to protect consumers and national security, but we must not let our zeal for regulation drive this important industry into the ground.
There is little doubt, as many have noted, that crypto has long been significantly overvalued relative to its fundamentals. As such, not only was the recent correction likely, but it is actually a much-needed remedy for overheated speculation. This demonstrates that traditional market mechanisms can still work well and that the feverish increase in valuations of cryptocurrencies and crypto companies has been overdone.
The dramatic rise and disruptive impact of crypto has also created challenges. The presence of unsavory early adopters – including nation-state actors bent on misinforming, hackers exploiting weak security to get paid, and those hiding illicit funding schemes by governments, terrorists and other other criminals – sparked a valid reaction from many government officials when it comes to seeing crypto as a legitimate private store of value.
However, if we do what many long-time regulators and academics like Reich and SEC Chairman Gary Gensler want, such as applying securities laws that are unsuitable for this new industry, we could severely stifle the ability of our countries to stay at the forefront of this transformative technology. . While there is no doubt that cryptocurrencies can, if misused, pose a critical threat to our economic and national security, it is also true that, if properly mined, cryptos can help maintain American leadership in free and open markets. Similarly, sufficiently limited regulation can easily correct some of the excesses we have seen so far.
To that end, Congress should initially set out a broad policy framework, ideally in bipartisan legislation, like the Senses Proposal. Cynthia Lummis and Kirsten Gillibrand. It defines the main policy objectives of crypto regulation, including consideration of national security concerns, and seeks advice from the executive branch on which agencies, if any, should regulate in this space and on the regulatory approaches they would propose in light of Congress. political framework. Only after defining such a framework and obtaining input from the executive branch should Congress provide detailed and narrow regulatory authority to one or more federal agencies.
Such a process could be longer and more complex than usual. But it’s especially important where, as is the case with crypto, there are economic, national security, and innovation imperatives that run in multiple directions. Moreover, given the speed of change in the crypto industry, taking a cautious and more deliberate approach to regulation, including gaining significant and detailed buy-in from Congress, seems like a better way to go.
Certainly, any regulation will need to address the real issues of money laundering, sanction evasion, terrorist financing and other criminal behavior that we have seen in the crypto market, as well as the implications of this new technology for the traditional nation. state monopoly on monetary policy. Many of these challenges can be seen in the Treasury Department’s recent decision to sanction virtual currency mixing service Tornado Cash for its use in money laundering and sanctions evasion. Vigorous debate has erupted over whether the use of property-based sanctions is legal.
It is critically important to ensure that crypto innovation takes place in free economies and creates greater financial inclusion, rather than being hijacked by authoritarian nation states seeking to control their own population and export wealth. repression abroad. The open, rules-based private market system built by the United States and our allies is the place for this innovation, not the land of digital authoritarians and human rights abusers.
It’s more critical than ever – as the crypto industry works to fix it – that we embrace and encourage its development as a transformative capability with the potential to advance important US economic and national security goals. United. Of all the areas in which government could regulate, this is one where a strong bias in favor of innovation and against ill-considered action is essential.
By keeping these principles in mind as regulators seek to act and Congress seeks to legislate, we can effectively balance the need to maintain American national security while also promoting our economic interests.
Guest comments like this are written by writers outside of Barron’s and MarketWatch newsroom. They reflect the views and opinions of the authors. Submit comment proposals and other feedback to firstname.lastname@example.org.
#Crypto #Correction #Shows #Market #Working