1/ A small silver lining of a crypto bear market is that it may relieve some regulatory pressure.
For good reason, regulators with limited resources focus attention on issues with widespread impact & systemic importance.
To a degree, shrinking markets = lower risk = less focus.
2/ Regulators looking at the crypto market over the last 12-18 months see a high-risk speculative mania inflated by unrealistic or even false promises.
They assume it will end badly for most participants just like it did after the 2017 ICO bubble & they want to limit the damage.
3/ They're particularly concerned because of how much retail participation they see in the 2022 edition.
With a few exceptions (like Katy Perry's crypto claws), the 2017 bubble didn't really breach the mainstream before it blew up.
This one has spread everywhere & keeps going.
4/ Can you really blame them?
The bull market kicked off with "degens" farming food tokens in mid-2020. Fast forward through 18 months & billions of dollars of speculation in dog money & jpegs, not to mention hacks & rug pulls, & you can see where regulators are coming from.
5/ Regulators also didn't have reason to fear systemic risk in 2017 & could be pretty confident in their ability to manage the impact.
2022 looks different, due to the presence of DEXs & (far more importantly) massive expansion in stablecoin volume. Stablecoins are a *big* deal.
6/ Put all this in the context of global monetary & fiscal instability due to covid, rising geopolitical tension, & a growing domestic partisan divide, & it's easy to see why regulators want to get a handle on crypto, which to them looks like the embodiment of 2022 irrationality.
7/ True or not, the SEC is largely credited in DC with ending the 2017 bubble via aggressive investigation & enforcement.
This is one theory that might explain the SEC's otherwise inscrutable approach in 2022. It's not about coherent regulation, it's about crushing the market.
8/ Regulators are definitely starting to see the genuine value & potential in crypto.
But they have more important things to do in 2022 than figure out how to redefine the whole body of financial regulation for a decentralized ecosystem.
This just isn't top priority right now.
9/ So from a regulatory perspective, it wouldn't be the worst thing if the market cooled off for a while.
Lower prices & less volume = fewer retail participants + reduced systemic role = less risk = fewer members of Congress saying "regulators do something" = room to breathe.
10/ No matter what, we have some big policy issues to sort out for crypto's future.
Ideally, we do that by a thoughtful process, not by rushed regulation or enforcement to pop a bubble.
In that sense, the short-term pain of a bear market could support long-term progress.
[end]
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President Biden signed the bill into law on Monday. The crypto tax provisions are officially set to take effect on January 1, 2024 (for FY2023 reporting).
Several members of Congress have already proposed new bills to fix this 👇
2/ As a reminder, the infrastructure bill imposed tax reporting requirements on an unknown but possibly massive number of actors in crypto, even where compliance is impossible.
This could include miners, validators, software developers, wallet providers, NFT creators, & more.
3/ The bill has three main flaws:
- the broker definition, which could force nearly everyone in crypto to do tax reporting
- the digital asset definition, which could apply to anything on a blockchain
- the cash transaction report expansion, which is the infamous 6050I provision
I really can't wait to explain @ConstitutionDAO to folks here in DC.
This is Web3 at its best: thousands of passionate people coming together to fund the preservation of a historic document & make it available to the American public after decades in private hands. Truly amazing.
The Constitution isn't just a set of laws or a historic artifact. It's a symbol of the freedom & opportunity at the heart of our democratic experiment.
Before Web3, who would've imagined that anyone, regardless of background, could participate in the American dream in this way?
I admit I've been a little emotional about it the past few days. Many of the notes from people who've joined are deeply moving.
I feel this on a personal level too, as a grandchild of immigrants who came to America fleeing persecution across the sea. 🇺🇸
Here's the truth: we've dodged most of the regulatory fire so far, but things will likely get worse before they get better.
To the extent I seem overly optimistic, that's a strategic choice. It's the best way to be effective, & when I *do* need to sound the alarm, you'll listen.
But when I say "we will prevail," as I often do in the course of explaining some enforcement action or proposed legislation or whatever, I mean it.
It won't be easy, there'll be hard days, & I don't know exactly what path we'll take to get through. But we will.
It's inevitable.
One of our huge advantages is our ability to coordinate online. We're digitally native: this makes us fast, broad, & effective in a way few other movements have been.
It's the same reason Bitcoin took off in the first place; the same reason everything we're doing has momentum.