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What Emerging American Legislation Means for Crypto Assets and CBDCs by@hughharsono

What Emerging American Legislation Means for Crypto Assets and CBDCs

Hugh Harsono Hacker Noon profile picture

Hugh Harsono

Hugh writes about cyberspace, digital currencies, economics, foreign affairs, and technology.

Governments all around the world are dealing with the increasing prevalence of cryptocurrencies in their economies, with varying levels of acceptance and rejection ranging from El Salvador’ September 2021 Bitcoin Law mandating Bitcoin as legal tender to China’s September 2021 cryptocurrency crackdown, with a blanket prohibition on all crypto-related transactions and mining. Governments are also increasingly examining central bank digital currencies (CBDCs) as an alternative to cryptocurrencies, with companies like IBM, ConsenSys, R3, and Ripple joining in the race to pilot test CBDCs. Stablecoins have also recently emerged as a hot topic and potential entry point for governments into the cryptocurrency market as well, adding more interest in the ever-developing cryptoasset space.

By comparison, while the United States government has discussed cryptocurrencies, CBDCs, and stablecoins at length, legislative guidance regarding cryptocurrencies has been relatively limited.  However, recent American announcements have provided some insights into a potential reversal of this trend, providing some critical hints into potential future guidance offered by the American government on cryptocurrencies and other crypto assets.

Bitcoin ETFs moving forward

In the middle of October 2021, the Securities and Exchange Commission (SEC) granted the greenlight for futures-based Bitcoin exchange-traded funds (ETF), the firsts of its kind in the industry. Proposed by ProShares and Invesco, these futures-based ETFs would track future contracts and would not be a direct investment in Bitcoin. This is a critical point to note given the volatility of Bitcoin, particularly when examining the impact of the SEC not blocking these specific ETFs from moving forward. However, it is important to emphasize that these Bitcoin ETFs simply provide additional options for investors to participate in the cryptocurrency market by lowering the barrier to entry for those unwilling or unable to purchase Bitcoin directly.

The announcement of Bitcoin ETFs is a significant victory for the crypto-asset ecosystem, providing the industry with a certain legitimacy through SEC approval. This landmark statement also demonstrates a certain level of comfortability with the cryptocurrency industry by the SEC through the known framework and lens of ETFs. This may be a potential window into future legislative action by the SEC; if the crypto-asset industry is able to provide finance-specific use-cases for cryptocurrencies, the SEC may be more willing to provide further approval and legitimacy to the traditionally nascent cryptocurrency legislation ecosystem. This can have the effect of aligning crypto-assets with mainstream financial services for the benefit of both industries.

Appearance in the Office of the Comptroller of the Currency’s 2022 plan

Additionally, on the same day in October 2021, the Office of the Comptroller of the Currency (OCC) released its 2022 Bank Supervision Operating Plan. This Operating Plan differed from those in the past because it included cryptocurrencies, going so far as to directly place “cryptocurrency-related activities” as among its top supervisory priorities.

The inclusion of cryptocurrencies in the OCC Operating Plan is especially notable as a follow-up to the OCC’s July 2020 publication of an interpretive letter authorizing the entities it regulates to custody digital assets. This is important given the vast reach of the OCC, which maintains the integrity of the federal banking system, to include regulation and supervision of 1,200 national banks and federal savings associations. By showcasing this history of supporting crypto-asset inclusion into the greater American financial system, the OCC has made it easier for other, more cautious regulators, to follow in its footsteps of supporting crypto-asset ecosystem growth.

Treasury Department sanctions guidance for virtual currency operators

Another key indicator of government guidance within the crypto-asset space included the October 2021 release of a brochure detailing the Department of Treasury’s Office of Foreign Asset Control’s (OFAC) guidance on sanctions. This additional guidance by yet another regulatory body of the American government highlights the government’s seriousness of implementing more streamlined processes for handling crypto-assets.

While not necessarily new material, the holding of digital currency operators in line with their traditional financial service operator counterparts is a clear demonstration of the American government’s newly developed approach to regulating crypto-assets. This guidance is particularly helpful given the implications some have made between crypto-assets and money laundering, with the Treasury’s guidance specifically to capture geolocation of IP addresses and VPN usage showcasing the necessity in addressing any potential improper use of digital assets.

Further impacts on crypto-assets and CBDCs

With both the SEC and OCC seemingly on board with providing support to the crypto-asset industry, investors can reasonably conclude that American legislation regarding cryptocurrencies seems to be moving to the cautious acceptance of crypto-assets. The fact that regulators are encouraging typically traditional investment vehicles such as ETFs to participate within the cryptocurrency ecosystem is particularly critical for ensuring the successful integration of crypto-assets within traditional banking services, and subsequently, mainstream financial offerings. By normalizing cryptocurrency-related banking, the American government can help develop a more mature ecosystem to support the crypto-asset space, helping to reduce risk while encouraging growth in the years ahead.

The support of key regulators within the financial sector also bodes well for a potential Federal Reserve-backed CBDC. Despite news in October 2021 by former Boston Federal Reserve Bank president Eric Rosengren that blockchain and distributed ledger technologies were not a part of the design in a hypothetical U.S. CBDC due to throughput and transaction speed concerns, the continual formation of a potential U.S. dollar is reassuring, especially given the impending release of China’s digital yuan. The future release of research between the Boston Federal Reserve Bank and the Massachusetts Institute of Technology will provide better guidance and understanding of the workings of a potential digital dollar, which Rosengren predicts will coexist with cryptocurrencies and stable-coins.

However, investors must maintain a cautious approach to crypto-asset investment given the government’s ability to reverse its support at any given time. For example, China has a long history of cracking down on cryptocurrencies dating back to as early as December 2013. Therefore,
while legislation may seem to be trending positive now in the United States, investors must be aware of the potential risks in assuming long-term governmental support for crypto-asset acceptance and participation.


While Bitcoin ETFs may not begin trading immediately in the fourth week of October 2021, the tacit support of crypto-assets by important regulatory bodies such as the SEC and OCC indicate positive trends for the future of the crypto-asset industry. Framing cryptocurrencies and their impact through traditional investment vehicles such as ETFs, while treating virtual currency operators like their traditional counterparts, may be just some of the options for crypto-asset ecosystem participants to steadily increase buy-in from key regulatory stakeholders. It will also be interesting to see how proposed CBDCs interact with crypto-assets in this respect, with the goal of financial inclusion for all combined with driving better, more compliant, and more consistent integration of crypto-assets and traditional banking services for economic growth.

Hugh Harsono Hacker Noon profile picture
by Hugh Harsono @hughharsono. Hugh writes about cyberspace, digital currencies, economics, foreign affairs, and technology.
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