What You've Been Waiting For: Crypto Regulatory Clarity Will Change Everything

Clear guidelines help new industries grow, and crypto has long been held back by the overwhelming lack of regulatory clarity in most parts of the world.

That could be about to change, as delivering regulatory clarity to the crypto sector has just become a priority for the US. 

This was recently emphasized by David Sacks, America’s first White House AI and crypto czar. He promised to deliver a legal framework to give the crypto industry the “clarity it has been asking for.”

But why is regulatory clarity so important, and what benefits can the crypto industry actually expect?

Let’s take a closer look.

Millions of Crypto Holders Are in the Dark

Right now, US law is quite contradictory when it comes to digital assets. Even at the federal level, there is an overwhelming lack of clear definitions or guidelines.

The Securities and Exchange Commission (SEC) has often claimed cryptocurrencies are securities, the Commodity Futures Trading Commission (CFTC) regulates them as commodities, and the Internal Revenue Service (IRS) classifies them as property.

In the absence of regulatory clarity, crypto businesses often have no choice but to move their operations offshore.

But it’s not just businesses who suffer. With confusing tax and legal obligations, the process of using crypto is often far more cumbersome than it has any right to be.

Still, in spite of this, the number of US citizens owning crypto continues to grow.

Research conducted by NFTEvening found that, as of last year, 40% of American adults owned crypto. It also projected that this number could surge to as high as 70% this year. That would amount to approximately 183 million individual crypto holders in the US alone.

This further emphasizes why regulatory clarity is so important. Without it, millions of individuals find themselves in an unnecessary and confusing gray zone.

SEC vs. MiCA Approach to Crypto Regulation

The Markets in Crypto-Assets (MiCA) framework was adopted across most EU countries back in 2023, offering a unified approach. While MiCA has proven controversial, especially due to its stance on stablecoins, the fact is that it does provide a level of regulatory clarity that is currently absent in other parts of the world. 

Here’s how it compares to the US’ current crypto regulation:

• Unlike the SEC’s enforcement-driven approach, MiCA establishes a clear set of rules for crypto businesses to follow. 
• It covers not only security tokens but also other types of digital assets, such as utility tokens and stablecoins.
• MiCA requires mandatory licensing for virtual asset service providers (VASPs). It sets clear requirements for capital and transparency, mandating that businesses publish whitepapers and disclose risks to investors. In contrast, the SEC requires businesses dealing with securities to undergo obligatory registration but lacks a comprehensive licensing structure and fails to provide clear guidelines.
• With the use of stablecoins growing annually, MiCA has established clear rules for stablecoin issuers, including mandatory reserves and external audits. Meanwhile, the US regulatory framework for stablecoins remains fragmented, leading to enforcement actions even against reputable projects like Paxos.

Thus, MiCA provides a comprehensive and proactive regulatory framework tailored specifically to crypto assets.

The SEC, on the other hand, relies on existing securities laws and significantly lags behind when it comes to providing regulatory clarity for crypto. 

However, with a new crypto-friendly administration and the recent promises made by David Sacks, there’s reason to hope that things may change for the better soon.

How Regulatory Clarity Could Change the Crypto Landscape

If the US government follows through on its promise to prioritize crypto clarity, it could lead to significant changes for the entire crypto sector.

This new approach could provide both crypto holders and businesses with some major wins.

For instance, when it comes to innovation and growth, regulatory clarity would give businesses a set of rules to follow while implementing innovations. In turn, they could focus on growth without the constant fear of regulatory crackdowns.

Regulatory clarity also offers investors better protection by reducing the risk of scams and fraud, increasing investor confidence. 

When it comes to taxes, clear regulations can simplify the average holder’s crypto reporting obligations, making it easier for all market participants to comply with tax laws.

Finally, TradFi institutions and large-scale investors would find it easier to enter the crypto space, leading to increased liquidity and potential price climbs.

All of this to say, regulatory clarity could contribute to the security, maturity, and growth of the cryptocurrency ecosystem. With MiCA already taking effect in Europe and new regulatory clarity finally on its way in the US, we’re not just talking about one country reaping all the benefits.

Crypto is global; wherever you are, increased clarity in other parts of the world can inspire policymakers in your own country to follow suit.

Or, at the very least, it could pump up your bags a little along the way.