Crypto Regulation in the US
In a recent executive order and subsequent strategy documents, President Biden has stated that he will limit the illegal use of cryptocurrencies and support their growth. When it comes to crypto and cryptocurrency brokerage firms, the United States has long struggled to reconcile these two goals.
Due to the volatility of cryptocurrencies themselves and the growing concerns regarding the types of crimes that are enabled by cryptocurrencies, the balance between encouraging entrepreneurial cryptocurrency ventures and discouraging criminal activities leveraging cryptocurrencies appears to have shifted slightly over the course of the past year.
It appears that domestic cryptocurrency policies are being developed in the United States, which could have a global impact on international criminal organisations. Recovering cryptocurrency payments made to criminals and sanctioning cryptocurrency brokerage firms are two examples of these policies.
The Wells Notice that was issued by the SEC for Paxos, the issuer of BUSD who has a direct relationship with Binance, is a clear example of targeting foreign actors. Paxos was informed by the SEC that they intend to sue them for issuing BUSD, presumably because BUSD is a security.
Paxos was also told by the NYDFS regulator to stop issuing BUSD. According to NYDFS, Paxos failed to carry out its obligation to carry out customized periodic risk assessments and due diligence refreshes of Binance by claiming that "The token wasn't administered in a safe and sound manner." During the time it takes for this stringent regulatory action to take effect, it may cast a shadow over stablecoins.
Although the United States appears to be attempting to make it harder for foreign actors to profit from international cybercrime, their enforcement-based method of regulation may discourage domestic innovation. Nonetheless, this recent action demonstrates the government's willingness to pursue criminal cryptocurrency brokerage firms, which is a significant step forward in US cryptocurrency regulation.