Background and Current Landscape
In recent years, there have been indications that the United States might finally enact legislation to establish basic standards for part or all of the cryptocurrency sector. As they draft their bills, lawmakers may draw inspiration from the recently implemented framework in Europe.
Diverse Opinions on Cryptocurrencies
A few years ago, the Atlantic Council published a report highlighting the vast global diversity of attitudes towards cryptocurrencies, with them being legal in 45 surveyed countries, partially restricted in 20, and completely banned in ten. Today, similar diversity of opinions can be found within the U.S. Securities and Exchange Commission (SEC).
Conflicting Views Within the SEC
Newly appointed SEC chairman Paul Atkins, a cryptocurrency enthusiast and former head of a cryptocurrency group, contrasts sharply with Democratic commissioner Caroline Crenshaw, who has criticized the SEC’s new “crypto-friendly” stance. Crenshaw argues that Atkins’ more permissive approach will ultimately lead to problems, as the SEC abandons what she considers well-founded enforcement actions against cryptocurrency businesses.
SEC vs. CFTC: A Regulatory Standstill
The differing views and a territorial dispute between the SEC and the Commodity Futures Trading Commission (CFTC) have hindered efforts to create a stable regulatory framework for the cryptocurrency sector in the U.S. While the SEC views cryptocurrencies as securities, the CFTC has attempted to classify them as commodities. Each entity’s perspective implies that it should be the primary regulator.
Potential Breakthrough in Regulation
President Trump’s Shift in Stance
President Donald Trump, who once described Bitcoin as “a scam,” has experienced his own conversion regarding the cryptocurrency industry. He and his wife have launched their own memecoins, though the value of $MELANIA plummeted quickly. Trump’s enthusiastic promotion of the cryptocurrency sector has helped mend ties with Silicon Valley and issued an executive order prohibiting the Federal Reserve from developing a central bank digital currency, which some see as potential competition to private sector digital offerings.
Congressional Consensus
There is an emerging consensus in Congress that a robust legal framework for the cryptocurrency sector is necessary. For example, the GENIUS Act (Guiding and Establishing National Innovation for Secure American Stablecoins) has made significant progress in the Senate and now holds a clear majority despite ongoing opposition from Senator Elizabeth Warren.
Stablecoins Legal Framework
While the House of Representatives may pose a tougher challenge, it seems likely that stablecoins will eventually receive a useful legal framework with viable standards on transparency and asset backing. Standard Chartered estimates that if the legislation is passed, the U.S. stablecoin market will grow from $240 billion currently to $2 trillion by the end of 2028, with most investments going into U.S. Treasury bonds, providing a beneficial boost to a government with a severe deficit problem.
However, passing the GENIUS Act would still leave significant uncertainty regarding more sophisticated digital assets. Nonetheless, they could also benefit from the changing legislative environment. Bitcoin’s price has risen again, possibly due to expectations (or perhaps just hope) that Congress will adopt the view that cryptocurrencies should be regulated by the CFTC.
Learning from Europe’s MiCA
As many other countries grapple with these issues, is there a clear model that the U.S. should adopt? Comparisons to Europe are not fashionable in Washington today, according to Trump’s view. Nevertheless, the European Union has already studied this matter and presented what appears to be a viable option: the Crypto-Asset Market Regulation (MiCA).
Impact of MiCA
Adopted in 2023, MiCA was only enforced at the end of 2024, making it too early to fully assess its implications. However, there are good reasons to believe that the law’s impact will be far-reaching. Indeed, its rules on appropriate asset backing for stablecoins circulating in the EU are already affecting market dynamics.
The requirement for reserves to be held in stable and solid assets is not contentious; however, the stipulation that at least 30% be held in EU banks has caused problems for Tether and Circle cryptocurrencies (though the latter seems willing to comply with regulations). An entity seeking authorization under MiCA must first apply to its local regulator, though if their assets grow to systemic levels, they may become subject to EU regulation.
Lessons for U.S. Lawmakers
Could MiCA offer lessons for U.S. lawmakers? Treasury Secretary Scott Bessent has advised U.S. bankers not to “outsource” regulation to international bodies, which has alarmed the Basel Committee, whose future is uncertain. However, borrowing an idea from elsewhere is not outsourcing. Moreover, regardless of the details eventually agreed upon to regulate stablecoins—a process that now seems imminent—there will still be work to do, as unbacked cryptocurrencies pose different challenges. The virtue of the EU’s MiCA framework is that it also covers them.
Congressional Signals on Unbacked Cryptocurrencies
Signals from Congress regarding unbacked cryptocurrencies point in various directions. It seems unlikely that bills proposing a strategic reserve of Bitcoin or attacking corruption (with veiled references to Trump’s own financial interests) will gain traction. Instead, the House Financial Services Committee and Senate Banking Committee should collaborate and consider launching an investigation into EU offices in Brussels. They will likely feast well and perhaps learn something.
The Author
Howard Davies, former deputy governor of the Bank of England, is chairman of the NatWest Group.
Copyright
Project Syndicate, 1995 – 2025
www.project-syndicate.org
