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Fintech experts discuss the future of cryptocurrency in the Biden Administration. Panelists include ... [+] Rep. Patrick McHenry, SEC Commissioner Hester Peirce, Prof. J.W. Verret, author David DesRosiers, and Roslyn Layton, PhD.

With a new President, Congress, and SEC Chair, the US can reset its approach and win the cryptocurrency race against China. Here are five resolutions to achieve those goals.

1.The Senate should confirm an SEC Chair who is open or at least neutral to cryptocurrency and financial innovation.

After Securities and Exchange Commission (SEC) Chair Jay Clayton (who made no secret of his animus for cryptocurrency with barrage of lawsuits, enforcements, and declarations to crush upstarts), the Senate can improve policy for cryptocurrency just by confirming a new Chair who is friendlier to financial innovation. Reports suggest that the incoming Biden Administration has in mind Gary Gensler who, in addition to his prior regulatory experience, runs MITs financial technology laboratory and its Digital Currency Initiative. Gensler has calledcryptocurrency "a catalyst for change in the world of finance and the broader economy." If confirmed, the SEC would gain another crypto ally along with GOP commissioner Hester Peirce, called the crypto mom for advocating policies to ensure US leadership in cryptocurrency. In the process, the Senate Banking Committee should ask Gensler probing questions about whether hell continue Claytons hostile approach, or whether he supports disruptive fintechs that seek to democratize financial services for Americans.

2.Stop the turf wars between financial regulatory agencies.

Regulation is not an unambiguous good. The US has accumulated over a century of financial regulation and spawned almost a dozen federal financial regulators (in addition to state level actors)many in the last decade alonebut no one can claim that the policy for the US financial industry is optimal. Indeed, the layers of regulation and labyrinth of federal offices and departments may have worsened the financial environment for consumers and innovators. As SEC Commissioner Hester Peirce argued in Reframing Financial Regulation: Enhancing Stability and Protecting Consumers, the more important regulation becomes, the more banks serve regulators, not customers. The notion that regulation increases the power of established financial institutions at the expense of small banks and financial innovators is well-documented. Regulators generally prefer to oversee a market a handful of giants than a dynamic market of emergent, innovative players. It stands to reason that the SEC as a securities regulator has no business overseeing all cryptocurrencies in all use cases. Already digital and cryptocurrencies are regulated by the Treasury Departments Office of the Comptroller of the Currency, the Commodity Futures Trading Commission (CFTC), the Internal Revenue Service, and the Department of Justice on anti-money laundering requirements.

3.Congress should work in a bipartisan fashion to adopt a rational, common sense approach to cryptocurrency.

It takes courage and fortitude to resist the urge to solve a problem through regulation, without first examining the larger issues at play. The first step is to determine whether government intervention would create greater harm. At RealClearPolicys event U.S. Crypto Policy in a Biden Administration, Congressman Patrick McHenry explained how for the last 15 years his job has been to stop the adoption of knee-jerk laws which would have killed cryptocurrency in the cradle.

However, having no regulation is not a substitute for thoughtful policy to help cryptocurrency flourish while respecting the measures that protect consumers and deter fraud. Moreover, if Congress doesnt clarify the boundaries, regulators will find new things to regulate to keep themselves relevant. McHenrys approach, which he laid out in a 2020 podcast with Rep. Dan Crenshaw (R-TX), is that blockchain is a new technology that needs a framework of its own.With Senator Sherrod Brown (D-OH) poised to chair the Senate Banking Committee, it is time to take a fresh look.

4.The SEC should withdraw its lawsuit against Ripple.

Just hours before he left the building, former SEC Chair Clayton lobbed a lawsuit against Ripple Labs, operator of the global settlement system using XRP, the worlds 3rd largest cryptocurrency. The suit alleges that Ripple, after 7 years, has been transacting with a security, not a currency, and thus seeks to punish the company for failing to register and to bar its founder and executive from participating in the crypto market. Such a question could have been answered with notice and comment rather than a lawsuit.

In any event, the SECs case has a fatal flaw in relying on the Howey Test from SEC v. H.J. Howey Co in 1946. According to law professor J.W. Verret of George Mason University in the RealClearPolicy discussion, a security is an investment contract where the holder participates in a common enterprise with the seller.But former CFTC Chairman Chris Giancarlo argues XRP is not an investment, and there is no commonality between its holders and Ripple. XRP is a medium of exchange and settlement.However, even if Ripple wins in court, and the company has asserted it will fight vociferously, the SEC will have already done its damage to the open source XRP ledger and every developer using it. The lawsuit has chilled other crypto enterprises, not to mention Ripple itself. Most defendants in regulatory enforcements never go to court because of the cost; instead they settle. Apparently Ripple tried to settle the question for years, but it appears that getting a headline was more important to Clayton. This abuse demonstrates what many legal scholars observe as the fundamental unconstitutionality of an administrative agency like the SEC, combining in one body an administrator, rulemaker, and judge and thus violating the separation of powers clause.

5.Congress should mitigate Chinas growing threat on digital assets.

China has laid the groundwork to capture the fruits of U.S. innovation and use its own digital currency to unseat the dollar on top of their de facto control of mining Bitcoin and Ether. As a key part of Chinas concerted efforts, its central bank has already begun distributing digital yuan to be used at thousands of retailers with nearly a fifth of residents in Shenzhen city testing the technology today. China aims to control global value of traded coins and are scaling their enormous domestic marketplace for mass adoption of their fintech applications. Yet again, on a technological breakthrough they had nothing to do with inventing, China is determined to make it their own. It is only a matter of time before Chinas digital currency is offered to billions across the globe, coupled with Chinese payment solutions copied from U.S. innovators.The U.S. wont be able to block the proliferation of digital yuan; it can only win by making a better solution and getting to market first. Moving quickly on a regulatory framework for cryptocurrency is essential to ensure US leadership and counter Chinas aggressive approach.

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Five New Year's Resolutions For Cryptocurrency - Forbes