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Jerome Powell, Fed Chair, stated this week that the central banking does not intend to ban cryptocurrency.
Market players call for greater regulatory clarity from the United States.
They expressed their hope that regulators would engage them in the writing of the rules.
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Many in the digital asset sector were surprised when Jerome Powell, Chair of Federal Reserve, stated that he had no plans to ban cryptocurrency during testimony before Congress. This was just days after China increased its crackdown on related transactions.
Bobby Zagotta, the US CEO of Bitstamp said that it was hard to believe that US regulators would choose that course of action considering the importance of cryptocurrencies in the lives of so many people. "I believe that doing so would be extremely disruptive and would put the US and economy in a difficult situation."
Charlie Silver, CEO at Permission.io, a crypto-focused online advertising company, stated that a ban would encourage financial and technological innovation outside the US and other countries.
Crypto players want two things instead: stakeholder engagement, and regulatory clarity.
Silver stated to Insider that the US is the financial centre of the globe - capital flows are here. "I have always believed that crypto regulation will be done by the US, but it would be light-handed."
The Securities and Exchange Commission is one of the regulators that has been trying to manage the space. Gary Gensler, Chief of the Securities and Exchange Commission, has been vocal in his criticisms of digital assets. He stated this month that stablecoins have become equivalent to poker chips and that crypto is not viable as a long-term source for private money.
However, none of these sentiments can be considered policy directives. His comments are only hints at the direction that the agency might take in regulating cryptocurrency. The market is left guessing about what they will need to do in order to comply with future regulations.
Zagotta expressed his hope that the US regulators will adopt a "constructive partner-oriented approach" to engagement. This would allow stakeholders to come to regulators and discuss policies. It is not a "regulation through enforcement" approach where regulations are retrofitted to fit current trends.
Insider was told by Zagotta that rules are necessary for widespread adoption. Some crypto players have an anarchist bent, and don't believe any rules apply in every jurisdiction. This is going to slow adoption.
Some have already attracted the attention of the SEC. Coinbase and the SEC got into a public dispute over Lend, its crypto lending program that would have allowed customers to earn 4% interest in their crypto holdings. If the product was launched, the SEC threatened to sue Coinbase. Coinbase pulled Lend out of its portfolio days later.
Many people simply want clarity when it comes to what should be done first. Silver said that regulators could focus on areas such as accredited fundraising, insider trading and customer verification/know-your-customer processes.
Authorities could concentrate their initial efforts on taxation provisions if they really want to control the industry, according to Dean Steinbeck (general counsel and COO of blockchain firm Horizen Labs). This would include closing an unproductive tax loophole and treating crypto more like stocks. This is something Congress is currently considering.
There is still some uncertainty about what regulators will come up with.
Steinbeck stated to Insider that he didn't believe the US would implement thoughtful policymaking. Steinbeck stated that he would expect the US to adopt haphazard laws with no clear direction, which are difficult to enforce.
Gensler had warned earlier in the week that cryptocurrency investors could be "likely" to get hurt if the space for digital assets lacks the same protection against fraud and manipulation as bank deposits or insurance.
