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In recent times, the world of cryptocurrency has come under scrutiny from governments, regulators, and financial institutions. There has been growing concern about the use of cryptocurrencies for illegal activities such as money laundering, terrorism financing, and tax evasion. Governments and regulators have been trying to bring some form of control and oversight to the cryptocurrency space.
The latest development in this regulatory effort is the hearing on the Crypto Crackdown bill by the US Senate Banking Committee. The hearing took place on July 27, 2021, and was aimed at discussing the need for stricter regulations and oversight in the cryptocurrency space.
The proposed Crypto Crackdown bill is a bipartisan effort to regulate the cryptocurrency market and protect investors from fraud and misconduct. The bill seeks to introduce several changes in the regulatory landscape of cryptocurrencies, including the expansion of the definition of a financial institution to include cryptocurrencies, the requirements for reporting cryptocurrency transactions, and the establishment of a reporting regime for cryptocurrency brokers and exchanges.
The Crypto Crackdown hearing saw participation from several prominent figures in the cryptocurrency industry, including Jerry Brito, executive director of Coin Center, and Jeremy Allaire, CEO of Circle. The hearing also saw the appearance of Commissioner Hester Peirce of the Securities and Exchange Commission (SEC), who has been a vocal proponent of cryptocurrency and blockchain technology.
Commissioner Peirce argued that the Crypto Crackdown bill could stifle innovation in the cryptocurrency space and cause firms to move operations offshore. She also suggested that instead of trying to fit cryptocurrencies into existing regulations, policymakers should create a new regulatory framework designed specifically for cryptocurrencies and blockchain technology.
Other participants expressed their concerns about the lack of clarity and guidance in the current regulatory environment. They argued that this has created confusion and made it harder for legitimate players in the cryptocurrency space to operate. They called for a more balanced approach to regulation that would provide clarity and guidance for cryptocurrency businesses while also protecting consumers from fraudulent activities.
The Crypto Crackdown hearing is just the latest development in the ongoing debate about cryptocurrency regulation. While some argue that the cryptocurrency market should be left to self-regulate, others believe that governments and regulators have a responsibility to protect consumers and prevent illegal activities. Whatever happens, it is clear that the future of the cryptocurrency market will be shaped by the decisions that policymakers make in the coming years.
As the crypto Crackdown in the United States continues many in the industry are wondering if anyone will come to the rescue well there do seem to be quite a few pro-crypto politicians fighting for the industry on the inside that’s because some of them hosted a hearing about the ongoing crypto
Crackdown which featured key players in the industry what was said sheds light on what’s really happening and what is yet to come today I’m going to summarize this crypto hearing and tell you exactly what it could mean for the crypto Market this is a video you do not want to miss
The crypto hearing I’ll be summarizing today is titled quote coincidence or coordinated the administration’s attack on the digital asset ecosystem it was hosted by the house Financial Services committee specifically the subcommittee on digital assets Financial technology and inclusion funnily enough the subcommittee was originally focused solely on diversity
And inclusion when it was created by the Democrats in 2019. when the Republicans won the house earlier this year they basically rebranded the subcommittee to focus on crypto making it the first crypto focus subcommittee in the US of a not surprisingly the hearing featured mostly Pro crypto Witnesses Mike belshi
The CEO of crypto custody company bitgo Tanya Evans a law professor at Penn State University a lawyer named Jonathan Gould coinbase’s Chief legal officer Paul Grewal and Lee reiners a Duke University lecturer now if that last name sounds familiar that’s because Lee participated in another crypto hearing
Which we summarized in another video if you watched that video you’ll know that Lee is very anti crypto anyways it’s important to note that this hearing took place on the 9th of March which was shortly before Signature Bank was shut down svb collapsed and circles usdc stablecoin lost its Peg
The dubious circumstances around signature shutdown underscore the severity of the crypto Crackdown if you watched our video about operation choke point 2 you’ll know the purpose of the crypto Crackdown is to entirely cut the crypto industry off from the banking system this was what the original operation
Choke point was all about just with different Industries and the same entities seem to be behind its latest iteration if you watched our recent video about The Man Behind operation choke point 2 you’ll know that it’s being orchestrated by a handful of regulatory agencies some of whom have
Been operating with no oversight what they all have in common is that they have close connections to the Democratic party this makes sense considering the original operation choke point was also orchestrated by entities affiliated with the Democratic Party note that I am quite evidently not a republican nor can I vote in U.S
Elections but if you want my opinion both U.S political parties suck and I hope that decentralized autonomous organizations replace all political parties someday the only reason I highlight this partisan ship is because it’s necessary to understand the context of the ongoing crypto Crackdown as well as what was
Said during the recent crypto hearing this partisan ship also suggests that the crypto Crackdown may not end anytime soon but I’ll come back to that later now this hearing began as all hearings do and that was with opening statements by the top politicians on the committee from both political parties and the
Opening statements of the speakers french hill was the first to go and he said everything you’d expect and given the circumstances Congress must create comprehensive crypto regulations ASAP because the current regulation by enforcement can’t be allowed to continue investor protection should be prioritized but so too should innovation
He also stressed that there should be specific regulations for stable coins which is significant that’s because stable coins have been the main target of the crypto Crackdown the fact that we haven’t seen regulatory action against a stablecoin issuer could be a sign that the worst is yet to come it’s possible
That the worst has started by the time you see this video in any case French said something else that’s important and that’s that the quote same risk same regulation rule that seems to have its origins in the world economic Forum does not apply to crypto that’s because crypto has different risks and therefore
Requires different regulations Amen to that the second politician to speak was Stephen Lynch he agreed that Innovation is important but he’s more concerned about investor protection he said he’s concerned by transparency in the crypto industry particularly from crypto exchanges he pointed to FTX and Celsius as examples of what can happen Stephen
Went on to say that he’s happy with the Biden administration’s approach to crypto regulation so far he essentially said that the collapse of silvergate bank is proof that the regulation by enforcement we’ve seen ought to continue a little later he said regulation by enforcement is a myth
Anyhow for the witnesses the first to speak was Mike who you’ll recall is the CEO of bitco he reviewed all the regulations that bitgo complies with and said that the company has been working proactively with Regulators the problem of course is that Regulators haven’t been as proactive particularly the SEC
The second witness to speak was Tanya who you’ll recall is a law professor at Penn State she started by saying that she’s been looking at crypto regulation through a quote non-partisan purely academic lens her conclusion The Regulators especially the SEC are not being fair to the crypto industry Tonya
Then advocated for the cftc to regulate standard crypto trading and even went as far as demanding that SEC chairman Gary Gensler answer for his actions note that the cftc is a principles-based regulator this makes it easier for crypto to comply with the cftc’s regulations than the secs the third witness to speak was
Jonathan who you’ll recall is a lawyer he began by saying that he’s speaking in a personal capacity presumably not to implicate his Law Firm Jonathan slammed The anti-crypto Regulators for putting out non-binding guidance for banks because it amounts to de facto regulation Jonathan also pointed out that attempts to completely eliminate risks associated
With crypto will result in those risks going elsewhere that’s why the focus should be on managing the risks associated with crypto he said that it should be up to Congress to determine how much crypto risk Banks can take so the fourth witness to speak was Paul who you’ll recall is the chief legal
Officer at coinbase like Mike Paul explained that coinbase is committed to compliance he talked about how most Americans don’t trust the existing Financial system hence why twenty percent of Americans hold or have held cryptocurrency Paul explained that the UK and the EU are creating their own crypto regulations and that the US is
Dragging its feet if you watched our videos about the crypto regulations being proposed in the UK and the EU you’ll know that they’re pretty damn good Paul said that the U.S needs to act fast to keep up and I agree by this point I was feeling like I’d overdosed on crypto Goodwill
However that little buzz came to an abrupt end with Lee the fifth witness to speak who you’ll recall is a lecturer at Duke University he was by far the outlier among the speakers because he spent his time talking about how the problem with crypto isn’t regulation the
Problem with crypto is crypto Lee said crypto has no value and regulations won’t fix that not only that but he said that the sec’s Securities laws do not need to be updated or changed they’re working exactly as intended he revealed that the SEC has brought over 100 enforcement actions against crypto
Projects and companies and has yet to lose a single case not good news for ripple Lee then went full agent Smith by declaring that the SEC must do more to do more the SEC must have full authority over the crypto industry to have full Authority Congress must pass a law that
Would classify every single crypto as a security including BTC this would give the SEC total control Lee has even prepared a road map for how Congress could do it it’s safe to say that he doesn’t have wagme tattooed on his chest so once all the opening statements were
Finished the question period began with the same pecking order of politicians French was the first to go and he asked Paul and Mike about what the process is for registering with the SEC they both said that they’ve tried and failed to register despite Gary’s offers French then asked Jonathan about the
Warnings from Regulators like the FED about Banks working with crypto Jonathan said that it’s odd how the warnings are so negative and that it’s even more odd that the warnings do not provide a path for banks to comply with whatever the FED is demanding from them
The second ago was Stephen and he asked Lee why crypto companies aren’t registering with the SEC to clarify the SEC has been offering for crypto companies to come in and register but every time they try they either get no reply or they get sued as far as Lee is
Concerned they won’t register because it isn’t profitable Lee added that existing Securities laws mean that it’s technically illegal for exchanges to list coins or tokens from crypto projects they have invested in Stephen followed up by asking whether there will be more FTX type collapses without crypto regulation
Lee said it doesn’t matter all of crypto is rotten Breeze guy breathe now the third to go was Maxine Waters she started by saying that she’s shocked that Republicans want to investigate the sec’s connections to FTX I mean it’s not like SPF met with Gary Gensler more than any other regulator
Say did you know that Maxine blew a kiss to SPF after one of his testimonies hmm anywho Maxine talked about the fed’s warning to Banks and the collapse of silvergate before asking Lee whether Regulators are overreaching as expected Lee said that Regulators are not overreaching he said they should focus
On Fiat on and off ramps and prevent big Tech from getting involved in crypto I wonder if that’s why meta recently dropped its nft plans for Instagram and Facebook hmm now the fourth to go was Frank Lucas he said that the SEC is regulating by enforcement and how it’s crazy that Gary
Asks crypto companies to register but shows them the door when they arrive he asked Tonya how this is consistent with the sec’s Mandate she said it’s not and it just creates confusion Frank then asked Paul whether the cftc should have authority over crypto trading naturally Paul agreed so Frank followed up with a
Second question does crypto really pose a threat to the financial system believe it or not but Paul said yes but said that the simple solution is clear crypto regulation the fifth to go was Bill Foster who I will forever remember as the U.S politician who demanded that the
Government have the power to reverse crypto transactions lo and behold he asked Lee whether it’s appropriate to have permissionless crypto transactions if they allow for illicit Financial activity Lee said that the only solution is to have every country comply with the financial action task force or fat F’s crypto regulation recommendations he
Also blamed Russia for all of the illicit activity in crypto Bill also suggested creating a database of registered crypto wallets that have been connected to a digital ID and asked Paul whether this was appropriate believe it or not but Paul said it was so long as privacy is adequately protected I hope
Paul was referencing decentralized digital ID not government digital ID you can find out just how dystopian government digital ID is using the link in the description I’ll also leave a link to our video about the fatf’s crypto regulation recommendations spoiler alert they are bad now the sixth to go was Tom Emma he
Began by saying that decentralization is about people taking the power back and the people in power don’t like that he correctly pointed out that the fundamental purpose of the Biden administration’s approach to crypto is total control of the financial system Tom then fired off a few questions to
The witnesses and the only one worth mentioning was about what affects the crypto Crackdown was having on the industry Jonathan explained that it’s making it harder for crypto to get access to banking services but said this is slightly different from operation choke point Jonathan elaborated that the difference is that the Biden
Administration is doing everything out in the open it’s obvious to everyone that he’s cracking down on crypto he said it’s also different because the Crackdown doesn’t just affect crypto but all kinds of financial Technologies such as virtual banking apps now the seventh to go was Richie Torres who happens to
Be one of the few pro-crypto politicians in the Democratic party Richie asked Mike whether the SEC was targeting onshore or offshore crypto companies and whether it’s true that a sort of turf war is going on between the SEC and the cftc Mike said that the SEC appears to be targeting onshore crypto companies
And confirmed that there does seem to be a turf war between the SEC and the cftc over who gets to regulate crypto this is interesting because it suggests that offshore crypto companies like binance and tether could be safe speaking of which Richie asked Paul how it’s possible that stable coins are
Securities if there’s no expectation of profit and how it’s possible that eth is a security if there’s nobody you can identify who’s driving the expectation of profit this is a reference to the sec’s flawed reasoning about both assets Paul conceded that it doesn’t make any sense Richie followed up by asking whether
It’s possible for a cryptocurrency to start off centralized and become decentralized over time what’s interesting is that Paul said this is true in both directions a crypto can become more centralized as well eighth to go was Warren Davidson he started by saying that he’s been waiting to have this hearing since 2017. gosh
He said that it’s finally time to create comprehensive crypto regulations that account for the fact that you can’t enforce traditional Financial regulations at the protocol level now we’re talking after submitting half a dozen statements from crypto lobbying groups to the record Warren asked some simple questions does the SEC regulate
Securities or payment systems Tonya answered Securities is self-custody important and does it protect you from FTX Paul answered yes to both Warren then said something downright epic and that’s that self-custody of crypto is analogous to holding cash and should therefore be protected by regulations his final question was whether FTX
Crashed because of crypto or because of fraud Jonathan answered that it was because of fraud if you’re still in the dark over what happened to FTX you can check out our video about that using the link in the description I digress now the ninth to go was Al Green
He asked Lee what needs to be done to protect investors Lee said that Regulators just need to apply existing rules to cryptocurrency and that it’s quote not that complicated he added that he’s against the cftc regulating crypto he wants the SEC to do it all
The tenth to go was John Rose he asked Paul to explain the regulations that crypto exchanges need to comply with Paul went on to list the dozens of state regulations that coinbase complies with John then asked all the witnesses whether merging the SEC and cftc is a good idea for crypto regulations Mike
Said that it would be best if the cftc regulates crypto by itself Tonya said that combining the two would be complex and potentially pointless as they’re supposed to be working together already Jonathan and Paul gave more nuanced answers which were likewise slanted towards the cftc when it was Lee’s turn to reply John
Interrupted him by saying something along the lines of I’m sorry my time has expired please stop talking based now the 11th to go was Sean Caston Sean asked how it’s possible that crypto can have a market cap in the trillions when there have been 28 billion dollars of
Bankruptcies so far he said that this massive discrepancy suggests that the actual value of the crypto Market is much smaller which may be true Sean then asked Lee whether there were any systemically important crypto companies Lee said thankfully no and said that its ironic crypto is trying to keep its
Access to banking services he also said that crypto has no value all the valuations are completely fake tell that to the private Equity Market snarky comments aside the 12th to go was Brian stale he asked Paul whether the SEC was getting in the way of crypto Innovation
Paul was careful not to speak badly of the SEC all he said was that the sec’s approach is causing the US to fall behind on crypto Innovation and that this is a national security risk the 13th to go was Wiley nickel great name he revealed that he’s working with
Richie and Patrick McHenry on a pro crypto Bill he asked Lee what regulations are needed to ensure that crypto Innovation continues Lee said there is no innovation in crypto he repeated that the SEC should be in control the 14th to go was Mike flood he asked Jonathan about the sec’s recently
Proposed crypto custody rule Jonathan said that it forces Banks to count the crypto they’re holding for their clients as assets on their balance sheets which makes them unwilling to custody cryptocurrencies the 15th to go was Brad Sherman and what he said is so ridiculous that it almost hurts to repeat it
Brad said that investing in crypto is like investing in the North Korean economy he said that cryptocurrency literally means hidden money and that only criminals want hidden money Brad simultaneously acknowledged that investing in crypto is a way of undermining the US dollar status as the world’s Reserve currency he also said
That U.S politicians can’t support SBS proposal to get the SEC out of crypto regulation he didn’t have any questions for the witnesses what a character 16th to go was William Timmons he asked Paul what use cases there were in crypto besides Financial stuff Paul listed everything you’d expect nfts
Decentralized digital ID and so on William asked if it’s possible to realize these use cases if all cryptos are securities Paul said no the 17th to go was Erin Houchin she took a shot at Lee and asked Mike if crypto would have gone overseas if there were crypto regulations in the U.S
Mike’s answer was no she asked Paul what effects the UK and eu’s crypto regulations will have he said the U.S won’t be able to set the standards this doesn’t seem to be entirely accurate because it appears that the US is in the process of pushing Global crypto standards using the financial stability
Board or FSB whether or not they will succeed is another question entirely and the fact that the UK and EU have gone Rogue suggests the answer is no more about the fsb’s upcoming Global crypto regulation recommendations in the description moving on now the 18th to go was Brian Donalds he
Dismissed Biden’s anti-crypto budget for 2024 and accused Gary Gensler of trying to kill the crypto industry he added that the Dodd-Frank Act was a disaster for reference the Dodd-Frank Act created the entities that are allegedly behind the crypto Crackdown Brian asked the witnesses whether U.S Regulators even have the technical
Capacity to regulate the industry and if they don’t whether it’s prudent to create a crypto-specific regulator the witnesses agreed except for Lee of course but they all continued to subtly push for the cftc to have crypto Authority the final politician to ask questions was Sam none he started by blasting the
Biden administration’s approach to crypto regulation and asked the witnesses what the downsides were of crypto going offshore Paul reiterated that it creates a national security risk and also results in Lost economic growth okay then crunch time what does all this mean for the crypto Market well in short
What was said during the hearing suggests that there are lots of pro-crypto politicians on both sides of the aisle who are trying to get pro-crypto regulations passed the problem is that they are not in control right now an anti-crypto Administration is in control and will continue to be
Until the 2024 election at the earliest even then it might not be until sometime after that election that pro-crypto regulations actually get past assuming of course a Republican president is elected this means there could be at least two years to go the caveat is that this timeline only applies to crypto
Regulations in the United States recall that the UK and the EU are in the process of rolling out their own surprisingly pro-crypto regulations Hong Kong is also on the cusp of legalizing crypto and could have institutions investing as soon as this summer that is why I and many others believe
That the crypto bear Market bottom could occur in the coming months assuming it hasn’t happened already of course once Hong Kong legalizes crypto in June and crypto regulations in the UK and EU come into Force later this year it’s hard to see how crypto could go lower between
Now and then though there’s no shortage of crypto and macro factors that could take the crypto Market lower the biggest crypto factor is a Crackdown on stable coins in the United States the biggest macro factor is the Fed continuing to raise interest rates and keeping them higher for longer
From where I’m standing it looks like the outcome of both of these two big factors will be determined by the summer this means another two to three months of uncertainty the Silver Lining to this crypto Crackdown is that it will ultimately incentivize the creation of decentralized Alternatives now you could
Argue that a true cryptocurrency can’t be regulated because there’s no centralized point at which Regulators can apply pressure to achieve compliance unfortunately there are only a handful of cryptocurrencies that meet these criteria and the trend towards centralization has been strong in recent years fortunately the crypto Crackdown could mean that more cryptocurrencies
Meet these criteria and that a new trend towards decentralization begins in some then there’s a crypto Crackdown going on in the United States and it is going to suck in the short term in the long term however it’s going to be of huge benefit to the industry reasonable crypto
Regulations will eventually come and trillions of dollars will flow into the market without restrictions just remember that Financial free doesn’t mean number go up it means the ability to truly own your assets and decide how and when they are spent the only way to achieve this ability is through decentralization
This will lead to even bigger gains once the real investment comes and it is coming slowly but surely thank you for watching and I’ll see you next time
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