Kraken executives discuss U.S. cryptocurrency regulation at Blockchain Association Policy Summit

An intimate conversation between two prominent cryptocurrency thought leaders provided a comprehensive snapshot of how far the U.S. financial technology regulatory debate has come. That tone echoes other influential crypto investors, including SEC Commissioner Hester Pierce, CFTC Commissioner Kristin Johnson, Senator Cynthia Lummis (R-WY), Senator Kirsten Gillibrand (D-NY), and Representative Ritchie Torres (D-NY). This resonated through follow-up panels with policy experts. .

Looking back on the evolution of the debate in D.C., Emmer emphasized that the Infrastructure Investment and Jobs Act of 2021 was a pivotal moment when lawmakers recognized both the transformative potential of cryptocurrencies and their strong support among American voters.

“We worked hard to get the attention of Congress, but it wasn’t until that bill that this grassroots group became active. “We have achieved several years of growth in a short period of time,” he said.

Emmer noted the significant progress made on the Clarity for Payment Stablecoins Act of 2023, emphasizing the bipartisan nature of cryptocurrency industry advocacy since its passage. He argued that the cryptocurrency voice is gaining traction across political divides.

Santori led a candid discussion about the U.S. government’s attempts to curtail private sector innovation by tightening regulatory controls.

“Central banks have mismanaged our financial system. This is why cryptocurrencies exist,” Emmer said. “Then people started trying to kill innovation. It can’t be, it’s coming, it’s already there.”

Emmer also explained that support for central bank digital currencies (CBDCs) is misplaced. “If you can’t make it open, permissionless, and private, it’s nothing more than a surveillance tool. They can’t.”

Noting that Congress is a government agency constitutionally empowered to regulate these matters, he warned against granting the agency unauthorized powers or waiting for a court decision to establish a market structure. He emphasized that Congress’s ultimate job is to protect citizens’ rights through common-sense legislation.

Protects customers from “completely unenforceable” IRS rules.

Elsewhere at the conference, Michael Nydegger, head of global tax at Kraken, led a panel of tax experts that included CoinTracker COO Vera Tzoneva and Coinbase VP of Global Tax Lawrence Zlatkin. Nydegger recently called the proposed IRS broker regulations “completely unworkable.”

He explained the original narrow scope of the broker reporting rule changes adopted by Congress. It’s about closing the perceived tax gap and funding the aforementioned Infrastructure Investment and Jobs Act of 2021. Nydegger said the proposed broad Treasury regulations enacting the changes in Congress, as currently written, would overburden the entire industry.

Nydegger noted that companies like Kraken are best positioned to implement the kind of legislation Congress originally intended.

“We are in a position to comply with these kinds of rules through the way we implement know-your-customer controls and collect data about our customers,” he said. “When you move into a decentralized space, you need systems that don’t exist by rules.”

When asked how the rules could be improved, panelists agreed that tax reporting could be better addressed at the blockchain level or using information from smart contracts recorded on the blockchain. All agreed that the proposed timeframe for implementing the rule is prohibitively short compared to the kinds of systems and data reporting the rule requires.

The panel agreed that problems with the proposed rule were that it would produce excessive, inaccurate, and redundant documentation. Taxpayers may have to sort through dozens of tax reporting forms to figure out how much tax they owe on cryptocurrency transactions. Additionally, IRS systems would need to be developed to collect the vast amounts of information required under the proposed regulations.

The panel agreed that a more phased, cautious implementation focused on the right locations would have made more sense. All expressed hope that the industry recommendations would lead to prudent adjustments before the rules are finalized.

Industry strengths and future direction of regulation

Overall, the conversation throughout the meeting reflected Rep. Emmer’s optimistic tone.

Many have noted the joint efforts of the House Financial Services Committee and the House Agriculture Committee to define key questions about cryptocurrency market structure and regulation, a fundamental requirement that will allow the United States to remain globally competitive in the industry.

High-profile messengers have all cited the progress cryptocurrency market participants have made to raise concerns and effect change. Most credited the industry with creating jobs and fostering innovation, noting the urgency of protecting these priorities along with consumer interests as the focus of U.S. regulation increases.

Regardless of the current political climate, cryptocurrency advocacy efforts have repeatedly been praised by regulators and attendees alike for improving Congress’s understanding of this emerging technology and its potential in the global economy.