Will 2022 deliver a unified US federal approach to crypto regulation? (January 2022)

Foreword: METI Advisory wrote this report for SEBA Bank AG. Abstract: One year ago, we revealed seven regulatory developments we expected to happen during 2021. All seven expectations but one materialised, albeit to different extents. Two jurisdictions went live with their Central Bank Digital Currency (CBDC); the Financial Action Task Force (FATF) continued to enforce the Travel Rule and addressed Decentralised Finance (DeFi); several Global Stablecoin (GSC) projects developed further while Tether considerably clarified its legal position with the US NY District Court and Commodity Futures Trading Commission (CFTC); the US Securities and Exchange Commission (SEC) approved the first bitcoin crypto Exchange Traded Fund (ETF), albeit one trading in the futures market and not spot, and enforcement continued to shape cryptofinance; contrary to our expectation, the Basel Committee on Banking Supervision (BCBS) did not introduce crypto prudential regulation although material development is expected in 2022. Finally, during 2021, US regulators initiated a clarification and alignment process of their cryptofinance regulatory framework. We expect this work to be completed during 2022. We anticipate the issuance of a federal cross-agency cohesive and coherent framework able to strengthen market infrastructure, market conduct, and investor protection. We expect the framework to close the gaps currently affecting cryptocurrency markets and grant complementary roles to federal agencies. We also expect core focus areas to include crypto exchanges, DeFi, stablecoins as well as banks’ crypto exposures. As some of these areas are working sites shared with international standard setting bodies such as the G7, the Financial Stability Board (FSB) and the Bank for International Settlements (BIS), we expect material influence of the US framework on this international work. Finally, we expect cryptoactors to have to adjust operations to comply with the requirements of a framework that on balance will support the development of sustainable cryptofinance.