Janet Yellen and The New Regulatory Faces
PowerKee’s “Bastion of Privacy” #11
Some in the cryptocurrency community fear the impact of regulation on the space. However, if our goal is to achieve mainstream adoption of cryptocurrencies, regulation is a necessary evil. Instead of fighting the regulators, we should engage with them and lend our knowledge and information to shape their understanding of the space.
A great example of this is the FinCEN rule on self-custody. We previously covered the subject here. After a fierce community-led campaign, organized by Jake Chervinsky and others, FinCEN has extended the comment period for its proposed rule by 60 days. This gives us plenty of time to thoughtfully engage in the process.
In this week’s newsletter, we want to dig a bit deeper on key regulatory figures under the Biden Administration. We also want to touch on Janet Yellen’s confirmation hearing for the US Treasury Secretary. While her verbal response addressing cryptocurrencies was somewhat negative, her written comments were more nuanced. Between Janet Yellen at the Treasury, Gary Gensler at the SEC and Michael Barr, former Ripple Labs board member, at the OCC, we are hopeful that 2021 will be a year of regulatory clarity.
Yellen and the regulation
In her confirmation hearing, Janet Yellen, the newly confirmed Treasury Secretary, said that cryptocurrencies could be used for illicit activities and that their usage should be curtailed. We understand the necessity for such a statement.
But most of the research on the subject shows just the opposite. A recent report by Chainalysis concludes that illicit activity made up only 0.34% of all cryptocurrency activity in 2020. That’s down from 2.1% in 2019. In relation to privacy coins, we have previously highlighted the research by the Rand Corporation showing that malicious actors are not necessarily using privacy coins.
To her credit, Yellen’s written testimony on the subject was more nuanced. It states that it is “important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.” Overall, between Yellen, Gary Gensler, Michael Barr, Chris Brummer and others, this new cohort of regulators is very well versed in blockchain and cryptocurrency matters.
To that extent, it’s exciting to see Grayscale donating $1 million to Coin Centre, the preeminent advocacy and research body for the cryptocurrency space. Grayscale will also match donations of up to an additional $1 million for a limited time. This, undoubtedly, is an important step to improve the regulatory prospects of our industry.
Cautiously optimistic for 2021
We expect privacy to be high on our communal crypto agenda this year. Privacy aside, cryptocurrencies are also an essential tool for a permissionless, free and, decentralized world. However, to bring these benefits to the masses, we need sound and comprehensive regulatory frameworks.
There are some positive signs on that front. The Biden Administration has put some highly capable and knowledgeable people in key regulatory positions.
We view this as a hopeful sign for regulatory clarity in 2021 and look forward to constructive regulation that will protect cryptocurrency users’ privacy rights. We hope that the new cohort of regulators will consider all the data as they shape the regulation for privacy coins like PowerKee.
PowerKee is a cryptocurrency network that makes privacy easy. Users can transact cheaply and instantly while maintaining anonymity. The PowerKee protocol uses a mixture of zero-knowledge proofs and coin mixing to provide strong privacy assurances to its users.