When can we expect an end to bad faith crypto regulatory actions? [90]

There's clearly an unsettling emergence of bad faith regulations. Is this the new normal for the crypto industry amidst power struggles and control?

In recent months, we have observed a growing narrative surrounding the crypto industry in the United States. Allegations of a regulatory chokehold, coined as "Chokepoint 2.0," have been simmering below the surface, sparking concerns within the cryptocurrency community. A recently leaked memo to Democratic House financial services committee members has only heightened these fears, outlining a proposed pathway that could potentially categorize most cryptocurrencies as securities, shifting the balance of power significantly.

This alarming development, coupled with an onslaught of other negative regulatory actions, forces us to confront the question we've been dreading: Are we witnessing a series of bad faith regulations and legislations intentionally designed to stifle the potential of a burgeoning industry?

Within the last week, we've seen the CFTC and the SEC issue stern warnings about the possibility of regulatory action against decentralized crypto exchanges, targeting not businesses but individuals and coders.

"Oh there’s no institution, there’s no individual, it’s just code, you can’t regulate that, it’s self-effectuating,’ but that really is the wrong set of questions,” said CFTC Chair Rostin Benham. “It’s really about what are U.S. customers being offered and exposed to? And who is either the individual or group of individuals who set up that entity, that code, to offer those products?"

Moreover, the SEC made it clear that their rule-making process could take years in a statement to Coinbase this week, during which they will continue to pursue enforcement actions. The message was unambiguous and chilling: crypto firms must brace for a future where they operate under the constant threat of regulatory sanctions, even as they navigate a landscape devoid of clear guidance.

Meanwhile, the White House proposed a 30% excise tax on the electricity used by cryptocurrency miners (more on that later in this newsletter!), a move that seems to indiscriminately penalize the crypto mining industry, regardless of their actual environmental impact. The argument presented - that crypto miners do not pay for their full environmental impact - is seen by many in the community as an outsized and fallacious justification for such a measure.

The proposed tax, irrespective of energy source, fails to account for the evolving eco-friendly initiatives within the industry. It seems to target crypto mining at large, with scant regard for their efforts towards sustainable energy use, painting a picture of a government targeting an industry in broad strokes rather than understanding its nuances.

In the face of these developments, it's hard to dismiss the concern that these are not mere regulatory actions in the interest of public safety, but rather the frantic pushback of a privileged elite class who are afraid of the redistributive potential of decentralized digital currencies.

Robert F. Kennedy Jr., a presidential candidate, has highlighted this fear, suggesting that the environmental impact argument is "a selective pretext to suppress anything that threatens elite power structures." His argument underscores the sentiment of many within the cryptocurrency community, who perceive the ongoing legislative actions as biased and unduly harsh.

There's a palpable sense that a line has been crossed, that these recent regulatory actions are not being undertaken in good faith but rather to protect entrenched financial interests threatened by the rise of decentralized finance. As we step into a new age of finance, it is essential that regulatory actions are undertaken in good faith or not at all, with a nuanced understanding of the industry and a genuine interest in public welfare rather than power preservation.

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Blockchain Bulletin

• White House releases a report to justify a 30% tax on cryptocurrency mining. The White House released a report justifying a 30% excise tax on electricity used by cryptocurrency mining, claiming it would be in the best interest of American communities and the environment, reported Decrypt.

• Vibe looks to turn NFTs into products with $4M in funds led by Alchemy. Vibe has raised $4 million led by Alchemy for its no-code platform to provide creatives the tools to customize and manage NFTs beyond just scarce tokens but to bring them utility such as ticketing and loyalty points, reported CoinDesk.

• China Launches national blockchain center to train Web3 specialists. China has officially launched the National Blockchain Technology Innovation Center after it announced it in February to train more than 500,000 specialists in blockchain technology, reported Cointelegraph.

• Binance is exiting Canada citing regulatory tensions in the country. Binance has announced that it is withdrawing from the Canadian market after regulators published new guidance regarding stablecoins and investor limits, reported CoinDesk.

Blockchain Behind the Scenes

• New York AG takes aim at crypto with new law citing ‘fraud and dysfunction. ’New York Attorney General proposes crypto law to impose strict regulations on cryptocurrency companies and digital assets claiming a need to reign in a claimed rampant presence of “fraud and dysfunction.”

• Hive Blockchain plans to grow 6 EH/s mining power with $100M share sale. Hive Blockchain announced that it plans to roughly double its computational power to 6 exahash per second with a $100 million share sale.