Virtual Currency Penetrating the Establishment... US Just Watching

Coinbase Boom and Global Bitcoin ETF Approvals Follow One After Another
Cautious Stance on Comprehensive Regulation Amid Concerns of 'Innovation Hindrance and Market Shock'

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] With the successful listing of Coinbase fueling expectations for expanded investment in Bitcoin and its integration into the institutional framework, attention is also turning to regulatory authorities' moves to regulate cryptocurrencies.

Currently, U.S. authorities do not recognize cryptocurrencies like Bitcoin as legitimate units of exchange. Instead, they view cryptocurrencies as a kind of medium of exchange that can be traded for other currencies as a means of exchanging 'commodities.'

The Financial Crimes Enforcement Network (FinCEN), under the U.S. Department of the Treasury, explained in its 2013 cryptocurrency regulatory report that "cryptocurrency exchanges are venues where cryptocurrencies as a medium of exchange are traded, acting as intermediaries that enable exchange for other currencies of similar value."

The most recent regulatory move was last December when FinCEN mandated suspicious transaction reporting for cryptocurrency exchanges and required identity verification for all cryptocurrency transactions exceeding $3,000.

Although regulatory policies are being implemented on an individual agency basis, a comprehensive regulatory framework covering the entire cryptocurrency industry has yet to be established. The reason regulatory authorities hesitate to take a hardline stance is that such measures could hinder investment and innovation in new technologies, and given the significant number of investors already involved, a shift toward stricter regulation could shock the market.

Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission (SEC) known for her crypto-friendly stance and nicknamed the 'Crypto Mom,' said in an interview with MarketWatch on the 7th, "Banning Bitcoin is like shutting down the internet." She added, "Regulating Bitcoin harshly means losing all the innovation surrounding digital assets," and stated, "We have already passed the point where harsh regulation of Bitcoin is feasible."

Peirce particularly emphasized that "market interest in cryptocurrencies has accumulated significantly," making it difficult to pursue a strong regulatory stance at this time. In fact, after cryptocurrency-tracking exchange-traded funds (ETFs) like Bitcoin ETFs were approved in Europe last year, Canada also approved a Bitcoin ETF in February.

Additionally, the crypto-friendly stance of new SEC Chairman Gary Gensler is expected to be an important factor. Previously, Gensler served as a professor in the Department of International Economics at the Massachusetts Institute of Technology (MIT), where he dealt with blockchain technology and the cryptocurrency industry. This background has led to expectations that he will continue to pursue crypto-friendly policies as SEC chairman. Peirce predicted, "His most important agenda will be climate change rather than cryptocurrency," suggesting that cryptocurrency regulation will be a lower priority.

Ultimately, regulatory authorities are expected to focus on regulating illegal trading activities in the short term while working toward establishing a comprehensive regulatory framework that does not hinder the development of the blockchain industry in the long term.

Todd Eret, senior regulatory analyst at Thomson Reuters, said, "A comprehensive regulatory framework to prevent illegal trading activities will emerge someday," but added, "For now, there are too many stakeholders involved in the market, so regulatory authorities will maintain a wait-and-see approach for the time being."

This content was produced with the assistance of AI translation services.