Chainalysis
- The US may not embrace crypto, but it needs clear regulation, Chainalysis' policy head told Insider.
- The CFTC recently sued Binance, whose compliance head critized regulators at an industry event.
- Chainalysis' policy head says Congress needs to pass crypto-specific legislation.
Caroline Malcolm, the global head of public policy at the blockchain data company Chainalysis, says there's one thing both crypto's boosters and skeptics can agree on: The US needs better regulation for the industry.
Crypto founders have long groused about what they see as the US government's hostility toward crypto. Some have even speculated that recent developments — such as the closure of the crypto-friendly Signature Bank — are designed to block off the industry from access to financial institutions. The New York state regulators involved in the shutdown of Signature have denied those claims.
Similar complaints abounded throughout the Links conference, an industry event recently held by Chainalysis in New York. "At a certain point, you can't work with a regulator or a jurisdiction that doesn't want you," said Noah Perlman, the global chief compliance officer of Binance, which recently got slapped with a lawsuit from the US Commodity Futures Trading Commission, in an interview on stage.
Even if the US government views crypto largely as a scourge, it still has an interest in protecting consumers, said Malcolm. She told Insider that she believes US regulators have gotten too caught up in how to classify crypto — a debate is still raging on whether certain cryptocurrencies are securities or commodities — at the expense of ensuring that companies operate soundly and ethically.
"Even if the only thing you care about is consumer protection, and you think this space is 'bad,' the only path forward is regulation," she said.
Malcolm said she believes the US needs a specific framework for digital assets such as crypto that determines capital and custodial requirements from companies, guards against fraudulent trading, and ensures that consumers receive appropriate investment disclosures.
She pointed to other areas, including Dubai and Switzerland, that have created policy frameworks specifically for digital assets, including crypto. Indeed, some founders have suggested that crypto companies may seek to move abroad because they think the US regulatory landscape is increasingly tenuous.
On the opposite end of the spectrum, other countries, including China and Egypt, have banned crypto altogether. But that approach hasn't kept people in those countries from accessing cryptocurrencies, according to Chainalysis' data, Malcolm said. China, for instance, returned to the top 10 in the company's Global Cryptocurrency Adoption Index in 2022, a year after the country reinstituted a ban on crypto.
But according to Malcolm, the US remains in the murky middle, with no clear regulatory stance. That's not a universally held view, to be sure: Some industry skeptics argue that cryptocurrencies plainly meet the definition of securities and that the industry has chosen to disregard legal requirements.
Malcolm said she believes that the issue ultimately needs to be resolved through legislation rather than among the various US regulatory agencies, including the CFTC and the Securities and Exchange Commission, that have pursued enforcement against several crypto companies.
"The regulators are working within the mandates that they currently have, but without that clarity from Congress," she said. "Hopefully, some of the events of recent weeks and recent months will provide that impetus."