The Whitehouse and Digital Assets — end of privacy ?
On September 16th, The House has spoken.
Answering the President’s Executive Order to regulate digital assets, the American administration has identified six priorities:
- Consumer / Investor protection
- Financial stability
- Counter illicit financial activities
- Protect the US’s financial leadership
- Increase financial inclusion
- Promote responsible innovation
Most of the decisions consist of asking regulators — like the SEC — to be more aggressive in their actions against illicit activities and criminals. More on that in out latest article about their decision to ban Tornado Cash.
One particularly interesting take is the reinforcement of the Financial Literacy Education Commission’s (FLEC) effort to increase public awareness around scams and false promises. As we believe that education is a better solution to protect consumers than banning and prohibiting.
FedNow
The cherry on top.
As it’s often said, there’s no putting the genie back into the bottle. Web3, crypto, blockchain, decentralisation, and whatever other concept that has emerged from the peer-to-peer decentralised economy dream — or utopia — has made one thing absolutely clear: our financial system has limitations and is discriminatory.
Or if it was already clear, it’s made it impossible to ignore anymore. Since, the crypto community is yelling very loudly that crypto is the answer to all these discriminations. And it is, in theory.
So the American administration has decided to stop ignoring the 7 millions Americans without bank accounts and the countless others affected by the bank’s rigidity and slow pace.
Their response: FedNow, “an instantaneous, 24/7, interbank clearing system.”
Basically, they took all the promises web3 has made and bundle them into an app — except for privacy, of course. An payment system scheduled to launch in 2023.
Even though it was always infinitely more probable that a government based solution will answer society’s issue, rather than a crypto based golden age. It’s still a lot to process for those who fear a CBDC-ruled dystopian economy. To you I say, hold on to your chair…
The real party pooper
You probably saw blood in the street these days…
The Merge and the whispers around Ethereum being overly centralised is definitely one of the reasons. Another one is the following.
AML and CFT actions work by making sure most actors go through the regulated economy. To do so, some laws exist to make it difficult to bypass it. Mainly, laws against unlicensed money transferring, the Bank Secrecy Act, anti-tip-off statutes and so on…
So I ask you, what’s a crypto transfer if not an unlicensed money transferring ? According the SEC’s finds a way to consider crypto as a security… oh wait.
The question is, what happens if the US Administration makes it illegal to transfer crypto outside of regulated exchanges — AKA KYCed wallets?
And when this happens, it’s a matter of time before other countries align. Remember bank secrecy ? Yeah, me neither.
Now, the question should be “What if crypto is completely regulated ?” What happens if every Bitcoin transaction is KYCed ? Is it that bad ? Does it annihilate all the worldwide benefits of having a quick, unbanked solution for money transferring ? I believe not.
CBDC
Now we’re talking — Orwell style ?
The Administration has identified various benefits to the use of CBDC:
- More efficient payment system
- Faster cross-border transactions
- Environmentally sustainable
- Promote financial inclusion (not sure about this one if you apply all the same rules to the CBDC as you do for the dollar…)
- Protect against cyber and operational risks (by controlling the money so much you can take it back from the thief, or a disobedient citizen ?)
- Safeguard the privacy of sensitive data (but from whom?)
- Minimise the risks of illicit financial transactions — yes.
Between us, I believe it’s mostly the latter.
For those who see the CBDC as the utmost privacy infringement, there’s some worry to have because it’s in the pipeline.
We live times of great turmoil, as destructive as they are creative. Time of great change or a lot more of the same.
Thank you for reading and as always, time will tell.
