Cryptocurrency exchanges Binance and Coinbase clamour to back new bitcoin regulations just as President Joe Biden signs the new cryptocurrency tax into law in the States.
On Monday, Biden signed the $1tn bipartisan infrastructure bill into law, in what has been seen as a major victory for his administration. Some bitcoin evangelists have, however, been sceptical about the new legislation as it includes a new tax for cryptocurrency brokers. The bill would require brokers to report information about all transactions over $10,000 to the Internal Revenue Service.
Cryptocurrency champions are concerned because the law isn’t clear about what type of entity can be defined as a broker – would it only regulate exchanges like Coinbase, Binance and Ripple, or would it also regulate the actions of miners and wallet developers?
The Treasury has said that it won’t target miners, but cryptocurrency wonks still worry that this promise may be changed if a new administration takes over in the White House.
Despite some concerns from the cryptocurrency community, analysts have called for more legislation to reel in the Wild West of blockchain money.
“There is a substantial lack of regulatory clarity regarding the underlying blockchain technology, which acts as a significant barrier to broader adoption,” GlobalData analysts wrote in a recent blockchain report.
“Regulations have struggled to keep up with advances in technology. This is particularly true with blockchain as it, at least in the case of public blockchains, reduces oversight. Many countries (and different agencies within a country) have taken steps to regulate blockchain in some fashion, but their disparate approaches have confused blockchain companies.”
Binance welcomes new regulations
Hours after Biden signed the new tax reform into law, Binance CEO Changpeng Zhao made a public call for tougher regulations for the cryptocurrency industry.
“Regulation and innovation are not mutually exclusive,” he said. “We want to do everything possible as an industry to work with regulators and world leaders to identify what is going to be the effective regulatory policy that, most importantly, protects users and spurs innovation.
“At Binance, we look forward to working closely with regulators to help increase their knowledge on the industry and its possibilities.”
Backing up the comment, Binance announced what it referred to as its “10 Fundamental Rights for Crypto Users”.
Apart from calling for clear regulations, the rights also propose every human should have access to financial tools that would provide them with economic independence, that exchanges should keep their money safe and that all users should have their privacy protected.
Binance also noted that responsible “crypto platforms have an obligation to protect users from bad actors and implement know-your-customer (KYC) processes to prevent financial crimes.”
KYC processes have been a hotly contested topic amongst cryptocurrency wonks. Bitcoin purists argue that any type of background check would run counter to the decentralised vision of Satoshi Nakamoto, the secretive founder behind the digital dosh.
Others, such as regulators and law enforcement agencies, have said that weak KYC processes enable criminals and terrorists to launder their dirty money.
Binance has been accused of having weak background checks in the past.
Ripple and Coinbase also welcome new rules
Binance is not alone among cryptocurrency startups to call for new rules. Earlier in November, blockchain software company Ripple called for a “real approach” to cryptocurrency regulations. The crypto brand urged lawmakers to engage in active dialogues with market stakeholders to ensure that any new rules don’t stifle innovation.
Similarly, Coinbase called for more regulations in October, especially clamouring for the US government to introduce a new regulator to oversee digital asset markets.
The exchange also called for more clarity in the sector, arguing that the US must ensure it leads the way in cryptocurrency regulations and not allow other countries to overtake it.