Conspicuous by its absence in the U.S. Treasury’s recent report on fintech, virtual currency will be the sole subject of an upcoming paper being developed by a working group of U.S. regulators attempting to chart a coordinated course for future regulations in the area.
Earlier this year, the U.S. Treasury released a report on fintech which aimed to clarify and define the government’s position on a number of issues in the space.
Among its headlines were ruminations on how a form of open banking could be brought to the U.S., as well as considerations of how fintech development more generally could be responsibly encouraged and regulatory fragmentation dealt with.
A similar project is now being undertaken specifically for virtual currencies, with all relevant federal regulators and enforcement bodies, including the Securities and Exchange Commission (SEC), the Financial Crimes Enforcement Network (FinCEN) and the Commodity Futures Trading Commission (CFTC), convening on the topic.
“What’s not covered in our fintech report is crypto and blockchain, because we realized when drafting that report that space is so new, evolving, revolutionary that it deserved its own review,” Brent McIntosh, general counsel of the U.S. Treasury, announced at Money20/20 in Las Vegas on Tuesday.
“So we’ve convened a working group to attempt to get the federal government thinking in a unified way, or at least a collaborative way, about how we think about the innovations of blockchain and crypto-assets from a variety of different perspectives.”
Such perspectives could range from the use of virtual currency and its associated technology for payments functions to its exploitation as a tool for money laundering.
“It’s a very valuable experience for all of us to get the banking regulators and the Treasury in a room together to think about these things in a way where we’re talking to each other about how we should think about them,” McIntosh said.
“Otherwise we all think about them in our own way: the SEC as a security, the CFTC as a commodity, the banking regulators as currency, FinCEN as a money laundering threat.”
Speaking to PaymentsCompliance on the sidelines of the conference, McIntosh said that state regulators were not included in the working group despite some — notably in New York — having already introduced their own licensing and enforcement regimes.
He added that the report was expected to be ready by the end of this year.
This kind of cooperation between federal regulators was mooted by Jay Clayton, chairperson of the SEC, in a hearing before the Senate Banking Committee earlier this year.
Individual U.S. federal regulators have by no means shied away from exerting their authority in the virtual currency sector in recent times and there has so far been little evidence of conflict between their different conceptions or definitions of virtual currencies.
There has also been open warfare recently between the states and federal regulators on prospective regulation for fintech, not least the OCC’s introduction of a national fintech charter.
However, there was general agreement that a consistent regulatory vision needed to be developed.
Marco Santori, president and chief legal officer at bitcoin wallet provider Blockchain, pointed to the about-face FinCEN undertook between 2013 and 2018 on how money transmitter laws applied to initial coin offerings (ICOs).
“It looks like FinCEN was responding to what ended up just being a trend,” he said, speaking on the same panel as McIntosh.
“Now the SEC has had this happen. The SEC has to take a snapshot of the world as it exists today and try to identify the risks that exist today, predict the risks that will exist tomorrow, and regulate them.”
The Uniform Law Commission has previously produced a piece of legislation governing virtual currencies designed for implementation at the federal and state level, but as a private body it has no official influence over regulatory direction.