Cryptocurrency Advocates Receive Increasing Support

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In Brief
  • As crypto currencies see increased adoption from institutional investors, regulators are still wary.

  • Crypto advocates say recommendations from FATF could threaten the decentralized nature of the blockchain-based coins.

  • Advocacy groups have seen increased membership and donations in light of crypto’s increased popularity.

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Even as cryptocurrencies see increasing interest from institutional investors, regulators still perceive them in a negative light. Fortunately, crypto advocacy groups are gaining in membership and donations.

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Recently, more institutional investors have shown an interest in offering cryptocurrency-based assets. Early last month, Cboe Global Fund filed with the US Securities and Exchange Commission (SEC) to offer a Bitcoin exchange-traded fund (ETF). This is after a botched attempt in 2019.

Later in the month, similar filings followed from Goldman Sachs and Fidelity Investments. According to JP Morgan analysts, bitcoin’s volatility has been dropping, which they say will pave the way for further adoption.

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Regulatory Impediment to Further Adoption

Persistent regulatory scrutiny still remains an impediment to further adoption. In December last year, Coinbase decried proposed regulations by the US Treasury Department in a tweet. Coinbase claimed the Treasury would “force exchanges to collect, store and share with the government personal information associated with crypto transactions.”

More recently, the Financial Action Task Force (FATF) updated its recommendations for virtual assets guidance. Crypto advocacy group Coin Center pointed out several issues with the new draft. It was described as unwarranted surveillance of “non-custodial entities”. It also highlighted that prospective penalties would be extreme. They also noted that the data collection would affect personal privacy and constitutional rights.

Crypto Advocates Seeing Support

Since December 2020, Coin Center has raised over $300,000 in small amounts of cryptocurrency from mostly individual donors. The Washington-based think tank also received $1 million from Square Inc. CEO Jack Dorsey and $2 million from crypto-investment firm Grayscale Investments.

According to Coin Center executive director Jerry Brito, the group is saving money as a war chest. It anticipates needing the cash to fight a larger lobbying battle or file a lawsuit over the new regulations. Brito said:

“Our job is to say absolutely there is a real risk here and that we all need to work together, but don’t throw away the baby with the bathwater.”

Meanwhile, the crypto trade association Blockchain Association has seen its membership rise by 10 to 34 since December. The number of its employees has also doubled. Members of the association include Binance.US and Ripple Labs. They intend to make contributions to the association to help polish bitcoin’s image. 

According to Blockchain Association executive director Kristin Smith, rebranding bitcoin for regulators could be the biggest challenge to its mainstream adoption. “We in the industry think it’s hugely problematic,” she said.

Smith said that proposed regulations would put unreasonable surveillance burdens on investors and operators of cryptocurrency networks. This would ultimately make it difficult for some services to remain decentralized. “It misses the entire point of this innovation,” Smith said. Earlier, Smith spoke of “mounting a charm offensive” with new Biden administration’s regulators to preempt these regulations.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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