Legal expert discusses how US political climate could redefine crypto regulations

Crypto.news recently spoke with BasedVC Head of Legal Bing Wang, who shared his views on the political rise of cryptocurrencies and upcoming regulatory transformations.

As the 2024 US elections approach, the political landscape around cryptocurrencies is experiencing major changes.

Surprising alliances are forming in Congress as crypto-friendly legislation gains bipartisan support. Key figures like Chuck Schumer and former House Speaker Nancy Pelosi, who have traditionally held opposing views, are now emerging as unlikely allies.

The Biden administration has begun to show a newfound openness on crypto policy, suggesting that skeptics like Senator Elizabeth Warren may soon find themselves isolated.

On the Republican side, former President Donald Trump intensified his support for the crypto community, vowing to protect digital asset traders and accepting campaign donations in cryptocurrency.

It’s pretty clear that the role of cryptocurrencies is expected to be a very important topic this year and something that could shape the future regulatory landscape for the emerging sector.

Wang believes this shift in political dynamics will accelerate the mainstream adoption and integration of cryptocurrencies in the US

How important do you believe the role of cryptocurrencies will be in the 2024 US elections?

Crypto has always been important in US politics. The infamous case of Sam Bankman-Fried and FTX caused a flood of cryptocurrency to candidates in the US midterms. However, its impact on the upcoming 2024 elections will be huge. With crypto-friendly legislation being passed by Congress in the last 3 weeks, Democrats and Republicans are moving towards even greater crypto adoption. Crypto will be on the election agenda and having a positive mindset about it will be an important talking point.

The Biden administration has demonstrated a shift in its stance on cryptocurrencies, as evidenced by the approval of spot Ether ETFs and conversations with crypto industry experts. What impact might these changes have on the cryptocurrency industry, and do you think they will address the concerns of crypto enthusiasts who have been critical of the administration’s previous policies?

The Biden administration’s sudden change of position is a big moment in crypto. Some claimed this was an attempt to mislead voters, but that doesn’t matter considering it addresses long-held concerns the industry has had. The House has passed a bill to repeal the Securities and Exchange Commission’s crypto guidance, which has caused the regulator to negatively impact the market. If passed into law, the new bill would help overhaul the SEC and CFTC’s oversight of crypto and create a more streamlined guide for crypto regulation. This is a big win for the industry.

Given bipartisan support for cryptocurrency-related legislation such as the American Blockchains Deployment Act and the FIT21 Act, what specific regulatory changes can the crypto community anticipate in the coming years?

Pro-crypto senators are meeting and an attempt to revive previously moribund crypto bills is underway. As the Biden Campaign begins discussing digital asset policy with its Democratic allies, Stabenow’s bill that would review how the SEC and CFTC share oversight over crypto has been tabled again. Stablecoin legislation is also being debated in Parliament. The coming years are expected to see a wave of legislation that will attempt to provide clear guidance on crypto regulations, something that many crypto companies have been longing for.

Do you think the government’s interaction with crypto industry experts will help increase the public’s understanding and awareness of cryptocurrency technologies?

Just as the Senate is trying to engage social media companies like Facebook, TikTok, and X (formerly Twitter), stakeholders need to meet in roundtables to discuss pressing issues. Avoiding meeting with crypto industry experts can only be detrimental in the long run. I firmly believe this will help increase trust in digital assets as the conversations continue.

What are your thoughts on the potential implications of appointing crypto-friendly officials to key regulatory positions?

Crypto-friendly authorities will generally make quicker decisions and key decision-makers will have a more positive outlook towards crypto. I don’t see any clear downsides to this move, other than it helps improve policymaking in the crypto space. The anti-cryptocurrency campaigns of uninformed authorities will diminish over time, and most will have no choice but to get with the program.

How might US policy changes impact growing interest in personal storage and privacy within the crypto community?

Changes in policy will significantly impact how cryptocurrency impacts the crypto landscape. Increased scrutiny will weaken the privacy features of some cryptocurrencies as regulators need a stricter approach to traceability and transparency in transactions. Stricter KYC and AML requirements may be implemented.

So what might be the broader implications for crypto security and user autonomy?

This could also lead to improvement in the field, as better hardware and innovative cryptographic methods could result from regulatory approaches aimed at improving privacy and security. The downside is that regulatory actions could cause a rift between the decentralized ideology for which cryptocurrencies were created and the centralized custody services of the traditional financial system.

How do you think regulators will respond to the growing demand for privacy and self-custody in the cryptocurrency community?

Regulators have a few options for this. First, regulators can embark on education initiatives to enlighten the public on the best ways to secure their tokens and use privacy-enhancing technologies. Second, startups and crypto companies may be allowed to test regulatory sandboxes for experimental purposes without fully adhering to compliance requirements. This can help test privacy and self-storage solutions under controlled conditions. Another approach is to strike a balance between privacy and regulation. While allowing privacy features in cryptocurrencies, regulators may balance this with the power to mandate scrutiny in cases of illegal activity or terrorist financing.

What impact might increased political activism and organization within the crypto community, such as the formation of crypto-focused PACs, have on the legislative process?

Since Coinbase and its major campaign finance partners Ripple and Andreessen Horowitz spent nearly $161 million on the 2024 US election, the big obstacle, the US legislature, has also begun to change. Crypto-focused PACs are interested in increasing the number of pro-crypto members, and that is exactly what is being done. The next Senate and House of Representatives are expected to have more pro-crypto lawmakers than ever before. This can only mean one thing: more crypto-positive laws or regulations.

Could the government’s growing support for cryptocurrencies and blockchain technology lead to a backlash from the traditional financial sector?

Traditional financial systems already see crypto as a threat. With government support, crypto could be at the top of the hit list. This can take a variety of forms, including regulatory pressure from lobbying legislators, technological resistance by refusing to integrate crypto into their operations, the imposition of barriers for crypto companies to operate on their platforms, and even public relations campaigns to prevent the public from adopting crypto.