Last week, the Chamber of Digital Commerce hosted a Congressional Briefing on the oversight of virtual currencies, money laundering, and sanctions compliance. Speakers’ narratives converged on the idea that smart regulation around cryptocurrencies is possible and necessary, but will require new tools and lines of dialogue. John Roth, Chief Compliance Officer of Bittrex, was optimistic about the dividends to be gained from this increased dialogue:
“I’ve met people who know a lot about blockchain. I’ve also met people who are skeptics of blockchain. But I’ve never met someone who knows a lot about blockchain and is a skeptic.”
Chainalysis Director of Government Affairs and veteran of the US Department of Treasury, Kris Doucette, posited that:
“the transparent nature of public blockchains presents opportunities for financial institutions to identify high risk customers and lay the groundwork for new tools that allow law enforcement to follow criminal financial activity.”
Jason Weinstein, partner at Steptoe and former Deputy Assistant Attorney General in the DOJ’s Criminal Division, agreed, saying:
“Bitcoin is more friendly to law enforcement than it is to criminals.”
Doucette proposed to the audience that cryptocurrencies are a revolutionary way to transfer value, but the public and private sectors need equally innovative tools to ensure bad actors cannot exploit these growing financial pathways. Onerous regulation runs the risk of chasing off growth in the space and foregoing the potential dividends to players on both sides.
The panel also discussed how human and financial capital has mobilized in the decentralized world of cryptocurrencies, leaving regulatory arbitrage an acute concern. Speakers agreed that the best defense is a risk-based approach to regulation and enforcement that codifies reasonable guardrails, thereby encouraging safe financial innovation. Amy Davine Kim, Global Policy Director for the Chamber of Digital Commerce, also bolstered the need for improved dialogue around cryptocurrency-related security concerns, citing Chainalysis intelligence as being key for facilitating productive public-private discourse.
Regulators learned about the need for tools to improve transparency and effective cooperation between public and private actors during the financial crisis. This week’s briefing is evidence that regulators are ready to operationalize those lessons in the cryptocurrency space.
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