Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Cryptocurrency regulation: Cryptocurrency regulation refers to the legal rules and guidelines governments and authorities implement to oversee digital assets like Bitcoin and Ethereum. These regulations aim to protect investors, prevent illicit activities like money laundering, ensure market stability, and clarify how crypto interacts with traditional financial systems. Approaches vary significantly across different countries and jurisdictions. See also Cryptocurrency, Crypto and banking, Crypto transactions._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Dictionary of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Policy of the United States on Cryptocurrency Regulation - Dictionary of Arguments
CRS II 14 Cryptocurrency Regulation/Policy of the US/CRS/Tierno/Labonte/Scott: A bank cannot engage in novel activities, unless it has gained approval from its primary regulator. Approval is based on two factors: (1) whether the activity legally is permissible and (2) whether it is compatible with the goals of bank regulation (e.g., whether it can be done in a safe and sound manner).(1) If the bank’s regulator found that those two conditions were met, a bank or bank holding company could engage in permitted crypto activities directly or own a firm engaged in permitted crypto activities as a legally separate financial subsidiary. >Cryptocurrency/Trump Administration. By statute, banks and bank holding companies are allowed to engage only in activities that are related to or “incidental to” the “business of banking.”(2) A bank can engage in permissible activities directly or own a subsidiary that does so or be affiliated with a firm that does so through joint ownership by the same parent holding company. CRS II 15 Outside of the banking subsidiary, the financial subsidiaries of banks and the nonbank subsidiaries of financial holding companies (FHC)(3) are permitted to engage in a broader set of activities—those that are financial in nature, incidental to a financial activity, or complementary to a financial activity.(4) A bank’s financial subsidiaries would be regulated by the bank’s primary regulator, whereas the nonbank subsidiaries of a BHC or a FHC would be regulated by the Fed. However, if a nonbank subsidiary has a primary regulator, such as the SEC or Commodity Futures Trading Commission (CFTC), the Fed’s authority is very limited. Either way, the Fed’s regulatory role is mostly to ensure that the nonbank subsidiary of a BHC or FHC does not put the bank subsidiary at risk, not to regulate the nonbank subsidiary like a bank. For the permissible activities of either banks and BHCs or financial subsidiaries and FHCs, Congress has identified some specific activities explicitly in statute, but has largely provided regulators discretion to identify others. Activities that are not explicitly permitted must be approved by the bank regulators.(5) In theory, some crypto activities might be viewed as a subset of activities that have already been approved in the past. Others might be viewed as novelactivities that could not be engaged in without regulatory approval. There is a long-established pattern of the regulators defining a wide array of activities as permissible, including when reasonable arguments could be made for and against. As such, whether crypto activities are related to the business of banking (and eligible for banks and BHCs) is arguably in the eye of the beholder, and is likely to depend on the exact nature of the activity. Whether they are financial in nature (and thus eligible for financial subsidiaries and FHCs) depends first on whether crypto assets are considered financial assets. Given the extensive list of activities that have been found to be related to the business of banking or financial in nature already, this bar may not be a high one.(6) CRS II 27 Questions about crypto and banking can be viewed through the lens of a longstanding debate about which side of the bank “regulatory perimeter” financial activities should happen on. With the exception of insured deposits, many financial activities can potentially be undertaken by banks (and other financial institutions directly supervised for safety and soundness) or nonbank financial firms - hence, similar activities can take place on either side (or both sides) of the perimeter, and may be regulated differently depending which side of the perimeter they take place on.(7) A) On one side of the debate, it is argued that risky products should be kept outside of the bank regulatory perimeter, where the risks they pose are less likely to cause broader financial instability or trigger taxpayer bailouts, directly or through access to the federal safety net. Risks posed by crypto may have no implications for financial stability if kept outside of the banking system, but bank failures are a known source of financial instability, so crypto losses could be a source of systemic risk if brought inside the regulatory perimeter. Welcoming a product inside the regulatory perimeter could also give banks, consumers, and investors the false impression that the product is safer than it is, increasing potential risks. B) On the other side of the debate, it is argued that risks posed by products can be better managed by banks with sophisticated risk management controls closely overseen by federal supervisors experienced in containing risk. CRS II 28 Former Comptroller of the Currency Hsu asserted, “Today no crypto firm is subject to comprehensive consolidated supervision. This means that there are gaps in supervision, and risks can build out of the sight and reach of regulators.”(8) Thus, it is argued, welcoming a product inside the regulatory perimeter can better contain risks and crowd out bad actors. (Taking this argument to its extreme, some argue that certain activities, such as stablecoin issuance, should be done only by banks or entities regulated by federal bank regulators.(9) This supposes that banks and their regulators are effective at managing novel risks, which some would dispute given repeated bank scandals and failures in recent decades. >Cryptocurrency risks, >Cryptocurrency, >Crypto transactions, >Fake transactions, >Cross-border payments, >Money laundry, >Crypto regulation, >Blockchain, >Bitcoin, >Crypto Firms, >Crypto and Banking, >Payment systems, >Stablecoins, >Ethereum, >Wash trade, >Crypto and Energy. 1. 12 C.F.R. 7.1000-7.1030 2. 12 U.S.C. 24 (Seventh). Permissible activities for bank holding companies are at 12 U.S.C. §1843(c)(8). 3. A FHC is a type of bank holding company that has been approved to engage in a broader set of activities. 4. Activities that are financial in nature are laid out in Title 12, Section 225.86, of the Code of Federal Regulations. A few activities can be performed by FHCs, but not financial subsidiaries, but these are unlikely to be relevant to crypto activities. For more information on FHCs, see CRS Report R48291, Bank Holding Companies: Background and Issues for Congress, by Marc Labonte. 5. Relevant to crypto, Title 12, Section 1843(k)(5), of the U.S. Code requires the Fed to determine whether a specific group of activities is permissible for FHCs, including “Lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities.” Under Title 12, Section 225.86, of the Code of Federal Regulations, a bank that wishes to engage in those activities must seek written permission from the Fed. By statute, the Fed is required to consult with the Treasury Secretary before reaching a decision. 6. One explicit statutory prohibition on activities worth noting is the Volcker Rule, which bans banks and BHCs from proprietary trading, meaning that banks could not hold as principal or transact in any crypto or digital asset or any derivative based on crypto for the bank’s own profit. The Volcker Rule provides an explicit exception to the ban for other types of capital market activities, however, such as market making and hedging. 7. Nicholas K. Tabor, Katherine E. Di Lucido, and Jeffery Y. Zhang, A Brief History of the U.S. Regulatory Perimeter, Federal Reserve Finance and Economics Discussion Series (FEDS), August 2021, https://www.federalreserve.gov/econres/feds/a-brief-history-of-the-u-s-regulatory-perimeter.htm. 8. Acting Comptroller Michael J. Hsu, Remarks before the Federal Reserve Bank of Philadelphia Fifth Annual Fintech Conference, November 16, 2021, https://www.occ.gov/news-issuances/speeches/2021/pub-speech-2021-117.pdf. 9. For example, a 2021 report issued by the Treasury and regulators called for legislation allowing only insured depositories to issue payment stablecoins. Today, stablecoins available to consumers are generally issued by nonbanks. Other proposals call for banks to issue payment stablecoins in competition with nonbank issuers. Under existing authority, bank regulators may be able to allow banks to issue payment stablecoins but could not prevent nonbanks from issuing them. See President’s Working Group on Financial Markets, Report on Stablecoins, November 2021, https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf. See also Wilmarth, Arthur E. Jr., “We Must Protect Investors and Our Banking System from the Crypto Industry,” Washington University Law Review, vol. 101, no. 1, 2023, pp. 235-326._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
Policy of the United States CRS I Congressional Research Service (CRS) Marc Labonte Fixed Exchange Rates and Floating Exchange Rates: What Have We Learned? Washington: Congressional Research Service of the Library of Congress 2007 CRS II Congressional Research Service (CRS) Paul Tierno Marc Labonte, Banking and Cryptocurrency: Policy Issues. CRS Congressional research Service Report R48430. Washington, DC. 2025 CRS III Congressional Research Service (CRS) Corrie E. Clark Heather L. Greenley, Bitcoin, Blockchain, and the Energy Sector. Washington, DC. 2019 CRS IV Congressional Reserch Service (CRS) Paul Tierno Cryptocurrency: Selected Policy Issues Congressional Reserch Service CRS Report R47425 Washington, DC. 2023 |
||
> Counter arguments against Policy of the United States
> Counter arguments in relation to Cryptocurrency Regulation
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
