Legislators need to educate themselves on Web3 if they care about protecting consumers, Steven Eisenhauer, chief risk and compliance officer at Ramp, writes.
For years now, the compliance community has been consistently warned that a deluge of new regulation for all things crypto, which would see the industry forever changed, is coming. We are still waiting for even the slightest of rains.
The only potentially well-informed (although imperfect) legislative efforts on the horizon – Europe’s landmark crypto legislation, MiCA – has been held up for a second time, apparently to allow more time for translation.
Instead, what we’re seeing is redundant legislation being proposed to solve a problem that has been misdiagnosed for political expediency. This reflects poorly on the depth of knowledge that our regulators have on Web3 technology as a whole, and how competent they actually are in protecting consumers.
Sometimes new technologies require new approaches to regulations. Let’s consider what’s wrong with the current approach, try to identify the real issues, and propose solutions to forge a new way forward.
Superfluous statutes
Take for instance the so-called Digital Asset Anti-Money Laundering Act introduced by Sens. Elizabeth Warren (D–MA) and Roger Marshall (R–KS) in December of the previous year.
The proposed legislation was presented at a Senate Banking Committee titled “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers.”
It would do little to protect consumers and would have done nothing to prevent what happened at FTX – as the almost singular focus of crypto-related regulations to date, a robust set of anti-money laundering (AML) rules have been widely applicable to crypto firms since before Sam Bankman-Fried even founded FTX.
As evidence of the effectiveness and application, we need only consider the settlement between Coinbase and the New York Department of Financial Services (NYDFS), which is only the latest example in a long list of regulatory actions taken against crypto firms related to anti-money laundering and sanctions failures.
