With Bitcoin’s recent surge past the $100,000 mark, driven by political shifts and regulatory anticipations, investors and regulators are revisiting the need for robust guidelines.
Lawrence Wintermeyer, executive co-chair of Global Digital Finance (GDF), a not-for-profit organisation committed to promoting fair and transparent markets for crypto and digital assets, presents a ‘Crypto Bill of Rights’.
His proposal, inspired by America’s historical documents, aims to provide a stable foundation for the tumultuous world of digital currencies. In this guest article, he explores how these guidelines might shape the future of digital finance.
Lawrence Wintermeyer, executive co-chair of Global Digital Finance
The Declaration of Independence from Britain in 1776 began a revolution, however the US Constitution wasn’t ratified until 1788 and didn’t go into effect until 1789.
The Bitcoin Network began on 3 January 2009 when Satoshi Nakamoto mined the starting block of the chain, known as the genesis block.
In honour of the 16-year anniversary of Bitcoin, and the favourable crypto winds of change blowing in the new incoming US administration, I propose a so-called Crypto Bill of Rights, which I wrote in a fashion that the ‘crypto founding fathers’ may have written it.
Let’s hope following the bitcoin revolution, this draft Bill will help to accelerate US policy thinking, legislation execution and proportional regulation implementation.
The Constitution for a Crypto Bill of Rights for the United States of America
We the People of the United States, in Order to form a more perfect Financial Services Market, establish greater Financial Fairness, insure greater domestic financial Stability, provide for the common economic defense, promote the general financial Welfare, and secure the Blessings of economic and financial Liberty to ourselves and our Posterity, do ordain and establish this Crypto Bill of Rights for the United States of America.
Article. I. Regulatory Agencies
We must clearly delineate which regulator is responsible for crypto, creating clarity across the crypto and digital assets markets and situating them within appropriate securities or commodities frameworks. This clarification must also include measures to support broader dematerialisation and clarification of the legal status for crypto as a digital hygiene factor for US markets.
Article. II. Banking Supervision
We must solve the crypto de-banking issue, immediately – the US must implement provisions to protect against auto-refusal and auto-account closure and industry should also develop a clear and fair appeal and justification process for the ‘risk’ identified.
Article. III. Judicial Branch
We must develop appropriate and proportionate prudential standards to ensure financial stability and risk management as crypto assets are integrated across the financial services industry. This must include the rollback of discriminatory and disproportionate policies such as Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121 which are not in line with broader prudential requirements and also undermine consumer protection.
Specific stablecoin legislation must set out clear market conduct guidance that ensures stablecoins maintain price stability, are fully backed and that systemic risks are mitigated. Stablecoins are currently a $200billion dollar market, and are the current killer app, delivering the fiat to digital on-off ramps for Web3. The US must foster growth and lead globally as a hub for their issuance and integration into global payments systems.
Article. IV States and Citizens
Market conduct standards, including consumer and investor protection requirements, must be created by US regulators. Both retail consumers and the US private sector should be enabled to choose the new crypto products which best support their personal and business needs – innovation must not be constrained by overly stringent requirements for crypto and other new technologies.
Article V Digital Government
The public sector and regulators must be equipped with new products, including DLT, crypto, and other revolutionary new technologies in order to bring the knowledge and benefits of ‘digital’ to agencies and the government, and for a complete and holistic digitisation of the US financial services ecosystem to take place. Industry must support and where possible help co-fund agency innovation hubs in partnership, in developing and implementing these digital technologies.
Article. VI. Equal Opportunity
Education, supported by a cooperative public and private sector, must be a priority in order for US citizens and businesses to benefit from the new jobs and opportunities created by crypto and new technologies, while also mitigating the risk of jobs which may be disintermediated by digitisation.
Article. VII. Fair Enforcement
US regulators must create clear anti-money laundering (AML) and know your customer (KYC) and counter terrorism finance (CFT) requirements for crypto, in line with international standards such as the Financial Action Task Force (FATF) guidance and extend the existing cyber guidance for financial services in an appropriate and proportional way for crypto, to best prevent illicit activities. Tax reporting guidelines and requirements must be developed which are transparent, achievable, and fair. These must not have outsized requirements which are punitive to either retail consumers or wholesale markets.
Article. VIII. Decentralised Rights
Proportionate DeFi guardrails must be developed, yet in such a way that acknowledges that this technology and the digital financial markets are still evolving. A clear distinction must also be made between the technology itself and open-source code vs. financial products and activities.
The US must consider leveraging access into the DeFi ecosystem such as regulated entities and exchanges when implementing guidance, as well as future solutions such as wider adoption of Digital ID, with a focus on regulating the activities conducted by counterparties, and not the technology itself.
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