Resolved: Increased United States federal regulation of cryptocurrency transactions

and/or assets will produce more benefits than harms.

Background

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Crypto Regulations by Country

Investopedia 9/21/21—Cryptocurrency Regulations Around the World. (2021). Retrieved 3 October
2021, from https://www.investopedia.com/cryptocurrency-regulations-around-the-world-5202122

United States
Despite a large number of cryptocurrency investors and blockchain firms in the United States, the
country hasn't yet developed a clear regulatory framework for the asset class. The Securities and
Exchange Commission (SEC) typically views cryptocurrency as a security, while the Commodity
Futures Trading Commission (CFTC) calls Bitcoin (BTCUSD) a commodity, and Treasury calls it a
currency. Crypto exchanges in the United States fall under the regulatory scope of the Bank Secrecy Act
(BSA) and must register with the Financial Crimes Enforcement Network (FinCEN). They are also required
to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) obligations.

Meanwhile, the Internal Revenue Service (IRS) classifies cryptocurrencies as property for Federal

income tax purposes. Crypto investors should closely monitor a high-profile court case between Ripple
Labs, Inc and the SEC, as well as threats by the agency to sue leading digital currency exchange Coinbase
Global, Inc. (COIN) for further regulatory clarity.

Canada
Regulators have generally taken a proactive stance toward crypto in Canada. It became the first country to
approve a Bitcoin exchange-traded fund (ETF) in February 2021. Additionally, the Canadian Securities
Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have clarified
that crypto trading platforms and dealers in the country must register with provincial regulators. Furthermore,
Canada classifies crypto investment firms as money service businesses (MSBs) and requires that they
register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). From a
taxation standpoint, Canada treats cryptocurrency similar to other commodities.

United Kingdom
The UK considers cryptocurrency as property but not legal tender. Additionally, cryptocurrency exchanges
must register with the UK Financial Conduct Authority (FCA) and are banned from offering crypto derivatives
trading. Moreover, the regulatory body has introduced cryptocurrency-specific requirements relating to know
your customer (KYC), AML, and CFT. Although investors still pay capital gains tax on crypto trading profits,
more broadly, taxability depends on the crypto activities undertaken and who engages in the transaction.

Japan
The land of the rising sun takes a progressive approach to crypto regulations, recognizing cryptocurrencies
as legal property under the Payment Services Act (PSA). Meanwhile, crypto exchanges in the country must
register with the Financial Services Agency (FSA) and comply with AML/CFT obligations. Japan treats
trading gains generated from cryptocurrency as "miscellaneous income" and taxes investors accordingly.

Australia
The land downunder takes a relatively proactive stance toward crypto regulation. Australia classifies
cryptocurrencies as legal property, which subsequently makes them subject to capital gains tax. Exchanges
are free to operate in the country, provided they register with the Australian Transaction Reports and
Analysis Centre (AUSTRAC) and meet specific AML/CTF obligations. In 2019, the Australian Securities and
Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and
banned exchanges offering privacy coins.

Singapore
Similarly to the UK, the island state classifies cryptocurrency as property but not legal tender. The country's
Monetary Authority of Singapore (MAS) licenses and regulates exchanges as outlined in the Payment
Services Act (PSA). Singapore, in part, gets its reputation as a cryptocurrency safe haven because long-

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term capital gains are not taxed. However, the country taxes companies that regularly transact in
cryptocurrency, treating gains as income.

South Korea
The country doesn't consider cryptocurrencies as legal tender or financial assets. As such, digital currency
transactions avoid capital gains tax. The South Korean Financial Supervisory Service (FSS) oversees crypto
exchange regulation, with operators subject to strict AML/CFT obligations. As of September 2021,
cryptocurrency exchanges and other virtual asset service providers must register with the Korea Financial
Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC).

China
The emerging global power doesn't class cryptocurrencies as legal tender; however, it does classify them as
property for the purposes of determining inheritances. The People's Bank of China (PBOC) bans crypto
exchanges from operating in the country, stating they facilitate public financing without approval. The world's
largest crypto exchange, Binance, initially launched in China but relocated its headquarters to the Cayman
Islands in 2017 following the country's crackdown on crypto regulation. Furthermore, China placed a ban
on Bitcoin mining in May 2021, forcing many engaging in the activity to close operations entirely or relocate
to jurisdictions with a more favorable regulatory environment.

India
Like most countries, the Subcontinent outlines that cryptocurrencies are not legal tender. Despite this, the
country's Central Board of Direct Taxation specifies that investors must pay taxes on crypto trading profits.
In 2018, the Reserve Bank of India (RBI) banned financial institutions from transacting in virtual currencies;
however, the Supreme Court reversed this decision in March 2020. Still, regulations remain uncertain in the
country. For instance, India proposed a law in early 2021 that would make it illegal to issue, hold, mine, and
trade cryptocurrencies other than state-backed digital assets.

European Union
Cryptocurrency is legal throughout most of the European Union (EU), although exchange governance
depends on individual member states. Meanwhile, taxation also varies by country within the EU, ranging
from 0 to 50%. In recent years, the EU's Fifth Anti-Money Laundering Directive (5AMLD) and 6AMLD have
come into effect, which tighten KYC/CFT obligations and standard reporting requirements. In September
2020, the European Commission proposed the Markets in Crypto-Assets Regulation (MiCA)—a framework
that increases consumer protections, establishes clear crypto-industry conduct, and introduces new
licensing requirements.

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Terminology
1. Bitcoin—also known as BTC, at satoshi or sats (fractions of a bitcoin)—
the first cryptocurrency and also the biggest by both market cap and price per
coin. Not the ‘best’ in terms of features.

2. Blockchain—the technology underlying cryptocurrencies which allow public,

anonymous, decentralized records of all transactions

3. CBDC—Central Bank Digital Currency—digital, programmable currencies issued

by a central federal government, offering many of the advantages of crypto
without the anonymized and decentralized aspects

4. CFTC— The Commodity Futures Trading Commission is an independent agency

of the US government created in 1974, that regulates the U.S. derivatives
markets, which includes futures, swaps, and certain kinds of options. (from
Wikipedia)

5. Defi—Decentralized Finance—finance including leverage and trading in the

crypto world—essentially, the Wall Street of crypto

6. ICO—Initial Coin Offering—the first launch of a cryptocurrency/cryptocoin to the

public, analogous to an IPO or Initial Public Offering for stocks. In ICOs, coins
are sold to the public with the promise that managerial/technical aspects of the
project will be expanded in the future, thus increasing the value of the coin.

7. KYC—Know Your Customer—rules that retail banks (and crypto exchanges)

must positively ID their customers to ensure tax compliance.

8. NFTs—Non-fungible tokens, or cryptocurrencies where each ‘coin’ is unique,

unlike a bitcoin or USD where each token is equivalent. NFTs are most popularly
used to show ownership of unique digital art pieces.

9. Rugpull—a money-making tactic where coin creators or owners invest in

marketing to pump up demand for and thus the price of their coin before selling
large amounts of the coin, which in turn drastically decreases the value of the
coin, leaving current holders with little to no value in the coin

10. SEC—Securities Exchange Commission— The U.S. Securities and Exchange

Commission is a large independent agency of the United States federal
government, created in the aftermath of the Wall Street Crash of 1929. The
primary purpose of the SEC is to enforce the law against market manipulation.
(from Wikipedia)

11. Shitcoins— any cryptocurrencies of very low value or those without a particular
purpose—for some, any coins other than Bitcoin and Ethereum

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12. Stablecoins—currencies pegged to fiat dollars—for example, the BUSD

(Binance USD), which is always equal to 1 USD.

13. Whale—a person/institution who holds a large amount of a particular

cryptocurrency

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Top Coins by Market Cap

from Coinmarketcap.com, accessed 2 October 2021

# Coin Name (Abbreviation) Market Cap (in billions of USD)

(market cap = price per coin *
number of coins)
1 Bitcoin (BTC) 907.6
2 Ethereum (ETH) 406.8
3 Cardano (ADA) 74.0
4 Binance Coin (BNB) 73.4
5 Tether (USDT) 68.0
6 Solana (SOL) 51.7
7 XRP (XRP) 49.6
8 Polkadot (DOT) 32.5
9 USD Coin (USDC) 32.0
10 Dogecoin (DOGE) 29.3
11 Terra (LUNA) 16.8
12 Uniswap (UNI) 16.5
13 Avalanche (AVAX) 13.1
14 Binance USD (BUSD) 12.6
15 Chainlink (LINK) 11.5
16 Litecoin (LTC) 11.1
17 Algorand (ALGO) 10.5
18 Bitcoin Cash (BCH) 9.9
19 Wrapped Bitcoin (WBTC) 8.9
20 Polygon (MATIC) 8.6

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Pro

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China
The US government has fallen far behind China on crypto – this poses an
economic and national security threat
Rogin 19—Rogin, Josh. China is racing ahead af the United States on blockchain. 2021, from
https://www.washingtonpost.com/opinions/global-opinions/china-is-racing-ahead-of-the-united-states-on-
blockchain/2019/03/07/c1e7776a-4116-11e9-9361-301ffb5bd5e6_story.html

[Josh Rogin: Education: George Washington University, BA in International Affairs 2001; Sophia University,
TokyoJosh Rogin is a columnist for the Global Opinions section of the Washington Post and a political
analyst with CNN.]

The grand strategic competition between the United States and China will be won or lost
based on who controls the rules and systems that govern 21st-century commerce,
communications and security. Washington can no longer ignore that China is way ahead on
the core technology that will underpin those systems: blockchain.

Last month, the Trump administration finally issued a broad U.S. plan for the development of artificial intelligence. But
there’s no U.S. government strategy at all for blockchain. Meanwhile, the Chinese
government’s blockchain effort is already well underway.
“Ever since the start of the 21st century, a new generation of industrial revolution is substantially reshaping the global
economic structure,” based on artificial intelligence, the Internet of things and blockchain, Chinese President Xi
Jinping told the Chinese Academy of Sciences in May.

Blockchain is described as “an open, distributed ledger that can record transactions between two parties efficiently and
in a verifiable and permanent way.” It is a core technology for Web 3.0, the infrastructure of the next generation of
online connectedness. For Western societies, blockchain is transformative in that it can be used to distribute power,
which in turn can promote rule of law, fight corruption and crime, and protect digital identity and privacy.
That’s not how Beijing sees it, though. If China can be first and build a blockchain system it controls, such as it did
with its state-controlled Internet, Beijing will be able to use the technology to repress its people, expand its influence
and subvert the Western rule-of-law-based system.

Days after Xi’s remarks, state-controlled media organ CCTV ran a one-hour special explaining that “the value of
blockchain is 10 times that of the Internet.” In that program, Chinese official Xu Hao said that the Chinese
government’s vision for blockchain was not “decentralization” but “de-intermediarization.”
“There is no way to get rid of the center,” he said.

The Chinese government’s blockchain strategy has been twofold: investing heavily in blockchain development,
innovation and implementation while also cracking down on blockchain systems it can’t control. Blockchain
development is part of China’s “13th Five-Year Plan.” The Chinese government has invested billions in blockchain
partnerships with Chinese firms. Through 2017, China filed more blockchain-related patents than any other country.
Last year, the China Development Bank signed a memorandum of understanding for blockchain research collaboration
with Brazil, Russia, India and South Africa.

On the local government level, China is now implementing blockchain for supply-chain

management, tax collection, food and drug safety, and more. As the National Interest reported,
China’s People’s Liberation Army is already working on how to weaponize blockchain for
“gray zone” attacks, meaning cyber and information warfare.
Meanwhile, Beijing has outlawed most crypto-currencies such as bitcoin and begun banning all virtual currency
exchanges, deemed a threat to government control over the economy. The Chinese government is reportedly
developing its own central-bank-backed blockchain currency.

Beijing is also cracking down on blockchain users’ privacy and free speech. In January, the Chinese government issued
regulations requiring blockchain companies to collect users’ private data, make that data available to authorities and

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censor user content. The South China Morning Post wrote that might be a response to a Chinese woman posting an
open letter alleging sexual harassment at her university on a blockchain after being censored on other social media.
Experts warn that the Chinese government is regulating blockchain not just for internal repression. Beijing is investing
huge amounts of time and effort to develop blockchain technologies that can be used to exert Chinese influence abroad.
While Westerners envision blockchain-based Web 3.0 as an open system, China could build a closed blockchain that it
controls and corrupts for its own purposes.

For example, Beijing could build a closed blockchain to manage the flow of goods, services
and funds through its multitrillion-dollar Belt and Road Initiative. Everyone would have to use that
system, and the Chinese government could abuse its control by inserting back doors — enabling data theft, intelligence
gathering, cyberattacks and more.
Victoria Adams, an executive at the blockchain firm ConsenSys, wrote last month that a Chinese Web 3.0 would not be
an open and transparent vision expressed by the United States, “but would be an authoritarian system controlled by the
Chinese government.” Furthermore, she wrote, “such a blockchain would allow China to set the terms for Web 3.0 and
control digital communications, asset transfer, and global supply chains that pass through the Belt-and-Road system — 
potentially seriously impacting U.S. interests.”

The United States is way behind, but it’s not too late. Last month, the Chamber of Digital
Commerce issued a National Action Plan for Blockchain, a call to action for the U.S.
government. The Trump administration should pivot from a regulation-based approach to one that supports
blockchain technology development and innovation through a coordinated interagency strategy, the paper argues.

If the Chinese government is able to control the way blockchain is developed and governed
worldwide, that would be a grave and long-term threat to U.S. and international economic
and national security.

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Consumer Protection
Hype, scams, and misinformation abound in the crypto industry—
consumers need regulations for protection
Huillet 21—Regulating crypto could give it ‘halo’ of legitimacy, says UK watchdog. (2021).
Retrieved 3 October 2021, from https://cointelegraph.com/news/regulating-crypto-could-give-
it-halo-of-legitimacy-says-uk-watchdog

[Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by
nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’
potential to reshape all aspects of our lives.]

Regulators must step up protections for consumers who invest in crypto tokens but also keep in mind that overreach
could backfire, the chair of the United Kingdom’s Financial Conduct Authority (FCA) has cautioned.

In a new speech written for the Cambridge International Symposium on Economic Crime ,

Charles Randell,
chair of the FCA and Payments Systems Regulator, said that there is currently a real
problem with consumers who delve into the crypto sphere without due awareness of the
risks. 

He singled out the role of influencers and paid-for advertising, in particular, noting that
Kim Kardashian’s recent Instagram promotion of EthereumMax (EMAX), a brand-new
token issued by “unknown developers,” “may have been the financial promotion with the
single biggest audience reach in history.” 
While Randell reserved judgement on whether or not EthereumMax is itself fraudulent, the vast reach of such a
campaign and its potential to mislead under-informed consumers should give regulators pause, he implied. 
Add to this dynamics such as retail investor hype, FOMO and the proliferation of pump-
and-dump crypto-related scams, Randell claimed that many consumers remain blind to the
financial risks they are courting by trusting influencer endorsements and savvy online
token campaigns. 
To illustrate his point, Randell underlined that around 2.3 million U.K. citizens currently hold crypto, 14% of whom
have “worryingly” used credit to purchase it. Moreover, 12% of crypto holders — roughly 250,000 Britons —
mistakenly believe they will be protected by the FCA or U.K.’s Financial Services Compensation Scheme should
things go wrong, according to the FCA’s research.

Randell nevertheless remains wary of overstepping the mark when it comes to the new asset class, emphasizing that
U.K. consumers are free to engage in other unregulated speculative activities — from gold and foreign currencies to
Pokemon cards — despite there being “no shortage of consumer harm in many of those markets”:

“So why should we regulate purely speculative digital tokens? And if we do regulate these tokens, will this
lead people to think that they are bona fide investments? That is, will the involvement of the FCA give them
a ’halo effect’ that raises unrealistic expectations of consumer protection?”

While the FCA currently regulates cryptocurrency exchanges and has banned the sale of crypto derivatives to retail
consumers, Randell proposed that its measures going forward should begin with a limited scope of two interventions
centered on stablecoins and security tokens.

Both, in his view, have the potential to offer “encouraging useful new ideas” for cross-border payments, financial
infrastructures and financial inclusion, and should not be hampered by overbearing red tape.” Instead, he argued for a
moderate approach, in line with existing rules for other FCA-regulated entities, to ensure that token issuers and
blockchain firms are solvent and transparent. He also pointed to the success of the FCA’s regulatory sandbox and its
role in enabling developers to test their ideas in a supportive and insulated environment.

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Criminal Activity
Cryptocurrencies enable illegal activity as it makes it harder for authorities to
track criminal
Seele 18—Seele, P. (2018). Let Us Not Forget: Crypto Means Secret. Cryptocurrencies as Enabler of
Unethical and Illegal Business and the Question of Regulation. Humanistic Management Journal, 3(1), 133-
139. doi: 10.1007/s41463-018-0038-x

[Peter Seele holds a PhD in economics from the university of Witten/Herdecke (D) and a PhD in philosophy
from the university of Düsseldorf (D). Before working at USI he was Assistant Professor at the university of
Basel   (ZRWP) and prior to that post-doc at the Institute for Advanced Studies in the Humanities (KWI) in
Essen (D). He has studied at the university of Oldenburg (D) and at Delhi School of Economics (IND)  and
worked for two years as business consultant in Frankfurt/M.]

In the following, I concentrate on the nefarious, harmful and unethical dimensions emerging only slowly as the rather
new phenomenon of cryptocurrencies and blockchain at large become visible only gradually. For the positive and pro-
social use of cryptocurrencies please refer to the article of Claus Dierksmeier in this issue of HMJ. As there are many
different dimensions still unknown, I concentrate on the ethical issues emerging from the secretive nature of
cryptocurrencies, less on the environmental carbon footprint or economic implications of volatility also discussed in the
literature. Among the most critical issues are black market transactions of weapons used in
terrorist attacks, drugs, or childpornography. Additionally, cryptocurrencies are more and
more found in blackmailing people and as payment for ransom-ware and other computer
viruses (Wannacry was a remarkable example). Money laundering also is on the rise via
cryptocurrencies. I argue that the nefarious use of cryptocurrencies threatens the prosocial
potential of cryptocurrencies and in general makes criminal activity easier for criminals
and less likely to track down by legal authorities. In closing, I discuss current debates about emerging
regulation presenting an overview of some jurisdictions and the option of regulated central bank issues
cryptocurrencies.

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Regulations can curtail tax avoidance and terrorist activities while allowing retail
investors to continue their activity
Stein 21—Stein, Jeff. White House reviews gaps in cryptocurrency rules as bitcoin swings wildly. 2021,
from h https://www.washingtonpost.com/us-policy/2021/05/25/biden-bitcoin-crypto-markets/

The Biden administration, lawmakers, and central bankers are wrestling with fresh challenges posed by cryptocurrency,
conferring in numerous meetings amid recent volatility in digital assets.
White House officials were briefed by career staff members at the Treasury Department about the risks posed by
cryptocurrency earlier this month, said two people familiar with the matter. The issue has also been raised in
conversations with federal regulators involving the department’s Office of the Comptroller of the Currency and the
Consumer Financial Protection Bureau (CFPB), although those discussions did not involve principal-level officials
such as Treasury Secretary Janet Yellen.
Administration officials are studying potential “gaps” in oversight related to the crypto
market, such as whether it can be used to finance illicit or terrorist activities, the people
said. They have also discussed whether some protections are needed for average retail
investors purchasing cryptocurrency. The White House and the Treasury Department are also publicly
backing a new plan to target cryptocurrency as part of a broader effort to address tax avoidance.
For now, federal regulators do not see the wild swings in the crypto markets as likely to threaten the broader stability of
financial markets, although they think the risks are worth monitoring, the people said. Administration officials
are discussing whether guardrails on cryptocurrency can be imposed while still allowing
investors to “dogecoin to their heart’s content,” as one person briefed on the matter said, referring to
trades of a popular cryptocurrency based on a meme of a dog.
“They’re aware of the fact that there are all kinds of risks in the abstract and things to look out for, but they are still
largely in a wait-and-see posture,” one person briefed on the matter said. The people spoke on the condition of
anonymity to discuss the private government review.
Spokespeople for the White House, the Treasury Department and the CFPB declined to comment.
At the same time, central bank officials and congressional lawmakers have talked increasingly about policies that stand
to significantly alter crypto markets. The House has passed and sent to the Senate bipartisan legislation instructing
federal regulators to study and clarify rules for cryptocurrency. Lael Brainard, a member of the Federal Reserve’s board
of governors, published an article Monday highlighting the potential benefits of a digital currency created and managed
by the central bank. A government-run digital currency could cut into cryptocurrency’s market share by offering a safer
alternative to instantaneous digital transactions.
Particularly high levels of volatility in the cryptocurrency markets have rattled investors
and highlighted to policymakers the potential dangers of the freewheeling sector. Bitcoin, the
most popular cryptocurrency, crashed by more than 50 percent from its prior peaks amid a broader crypto sell-off.
Dogecoin fell by more than 10 percent before paring back its losses. The crypto markets appear to have been rattled by
Elon Musk saying Tesla would no longer accept bitcoin as a payment for vehicles, as well as Chinese officials
suggesting new restrictions on financial firms linked to cryptocurrency.
The recent market instability has compounded existing concerns about cryptocurrency,
including fears about the environmental effect created by things such as bitcoin mining.
Government officials also think cryptocurrency makes it easier for criminals to transfer
money without detection. The market limit for cryptocurrency topped $2 trillion for the first time in April, just a
few months after it hit $1 trillion.
“Cryptos are becoming a larger segment of the financial system, and regulators should be concerned about how this
market intersects with our financial regulatory framework as banks and other financial institutions become more
entwined with it,” said Gregg Gelzinis, a banking expert at the Center for American Progress, a center-left think tank.
Digital currency has posed a conundrum for policymakers for years. It is hard to regulate in part because it is not
controlled by conventional trading institutions, such as banks or other typical financial firms.
Cryptocurrency drew less scrutiny when it first emerged. Its prominence was accelerated during
the coronavirus pandemic, when hundreds of billions of federal dollars pumped directly to consumers spurred casual
investors to explore novel financial instruments. Institutional players, including some Fortune 500 companies, also got
involved, leading to further proliferation.
The amount of energy required to “mine” various types of cryptocurrency has alarmed environmentalists, with bitcoin
mining alone consuming more electricity than entire countries, according to the Cambridge Center for Alternative

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Finance. “That is a staggeringly large number for something that is absolutely useless,” said Eswar Prasad, an
economist at Cornell University. “It’s an environmental disaster.”

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DeFi
DeFi is increasingly important in the finance sector—yet crypto doesn’t fit into
existing regulatory framework, meaning new regulations will have to be created
around crypto
Siripurapu 21—Anshu SiripurapuCryptocurrencies, Digital Dollars, and the Future of Money. (2021).
Retrieved 3 October 2021, from https://www.cfr.org/backgrounder/cryptocurrencies-digital-dollars-and-
future-money

Unregulated finance. The
rapid rise of cryptocurrencies and DeFi enterprises means that billions
of dollars in transactions are now taking place in a relatively unregulated sector, raising
concerns about fraud, tax evasion, and cybersecurity, as well as broader financial stability.
If cryptocurrencies become a dominant form of global payments, they could limit the ability
of central banks, particularly those in smaller countries, to set monetary policy through
control of the money supply.

rapid ascent and

Many governments initially took a hands-off approach to cryptocurrencies, but their
evolution, coupled with the rise of DeFi, has forced regulators to begin crafting rules for the
emerging sector, a process that could take years. Regulations vary widely around the world, with some
governments embracing cryptocurrencies and others banning them outright. The challenge for regulators, experts say,
is to develop rules that limit traditional financial risks without stifling innovation. 

In the United States, policymakers have indicated they are moving to

regulate cryptocurrencies and the emerging DeFi sector. However, cryptocurrencies do not
fit neatly into the existing regulatory framework, creating ambiguity that lawmakers will
likely have to resolve. U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has called the
cryptocurrency sector a “Wild West,” and urged Congress to give the SEC greater powers. Federal Reserve Chairman
Jerome Powell and Treasury Secretary Janet Yellen have both called for stronger regulations of stablecoins. 

DeFi looks similar to the financial tolls that caused the 2008 financial crisis
Wu 21—Ethan Wu (2021). Top banking regulator compares crypto to tools that sparked the financial crisis
while lobbyists decry 'overly conservative' approach. Retrieved 3 October 2021, from
https://markets.businessinsider.com/news/currencies/crypto-regulation-financial-crisis-michael-hsu-occ-
brian-brooks-basel-2021-09

A top banking regulator said on Tuesday that crypto and decentralized finance look similar
to the financial instruments that sparked the 2008 financial crisis just days after crypto
lobbyists complained about punitive regulation.
Michael Hsu, who heads the Office of the Comptroller of the Currency, compared crypto's
trajectory to that of credit default swaps, the notorious tools that sank markets in 2008,
according to Bloomberg.
"Crypto/DeFi today is on a path that looks similar to CDS in the early 2000s," Hsu told a
blockchain panel on Tuesday. "Fortunately, this group has the power to change paths and avoid a crisis."
Hsu's critical remarks came just days after the Financial Times reported on a letter sent by top crypto lobbyists to the
Basel Committee, which sets global standards for bank regulation.
The Basel Committee's crypto regulation proposals - requiring banks to hold $1 against each dollar of crypto holdings -
were "so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto-asset
markets," the lobbyists wrote.
The stringency of regulation is emerging as the top issue for the crypto industry. In response, firms have hired armies of
former regulators to exert maximum influence on fast-changing policymaking.

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But the crypto industry still faces the push and pull of regulators' varied opinions. Case in point: Hsu took over the
OCC, which oversees federal and foreign banks, from Brian Brooks, a more crypto-friendly regulator who went on to a
brief stint as CEO of Binance.

Impact: A crash in the crypto market could influence the wider financial markets
Massad 21—(2021). Retrieved 2 October 2021, from https://www.brookings.edu/wp-
content/uploads/2019/03/Timothy-Massad-Its-Time-to-Strengthen-the-Regulation-of-Crypto-Assets-2.pdf

[Timothy George Massad is an American lawyer and government official who served as the chairman of the
Commodity Futures Trading Commission under President Barack Obama. He is an Adjunct Professor of
Law at Georgetown University and graduate of Harvard Law School]

The case for better regulation is also about broader societal interests, however, which is why those who have no interest
in trading these assets, including those who believe the sector is a giant bubble, should care as well. The use of
crypto-assets for illicit payments — including particular ransomware for cyberattacks — is
one reason we should take action. Cyber security is another: this new sector is vulnerable to
cyberattacks, and the complex interconnections among financial markets and financial
firms mean that such attacks could cause collateral damage to other financial market
infrastructure.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Exchanges
Billions of dollars in investor cryptocurrency is held on largely unregulated crypto
platforms that don’t have the same scrutiny or rules to protect customers that
banks have
Massad 21—(2021). Retrieved 2 October 2021, from https://www.brookings.edu/wp-
content/uploads/2019/03/Timothy-Massad-Its-Time-to-Strengthen-the-Regulation-of-Crypto-Assets-2.pdf

[Timothy George Massad is an American lawyer and government official who served as the chairman of the
Commodity Futures Trading Commission under President Barack Obama. He is an Adjunct Professor of
Law at Georgetown University and graduate of Harvard Law School]

The new crypto intermediaries include hundreds of crypto-asset trading platforms or

“exchanges,” on which you can buy and sell Bitcoin and other crypto-assets. These new
institutions are handling billions of dollars (or the equivalent) in investor assets. By one
estimate, there are over 500 such platforms.
The first chart below lists the largest trading platforms headquartered in the U.S., followed by a chart of some of the
largest in the world.

Many of these firms are not simply trading platforms; they also perform a variety of other
functions that we would never allow a traditional securities or derivatives exchange to
perform due to the potential conflicts of interest. It is also because of the multiple roles that crypto-asset
exchanges play (or aspire to play) that I use the term “intermediary.”

For example, many of these firms hold your crypto-assets, which saves you the trouble of
figuring out how to store and transfer a crypto-asset on your phone. (If you use your phone but
lose your private key, your crypto-assets are lost.) Some investors use third party “wallets”—technologies that hold
your crypto-assets, just as a physical wallet holds your cash. The crypto-asset platforms may also convert your U.S.
dollars or other fiat currency into crypto-assets and vice versa. They may make payments for you.

In the securities and derivatives world, our laws require that the trading platform be
separated from the custody function because of the risk of conflicts. Regulations are
designed to safeguard customer assets, such as segregation of customer funds from
proprietary funds. There are no similar requirements specific to the crypto world.

How an exchange holds your assets may also vary. An exchange might hold your Bitcoin or
other crypto-assets in its own wallet, and also hold your private key; the exchange then
executes transactions on your behalf, and is not supposed to share your private key with
anyone. Alternatively, you might simply have a claim for Bitcoin at an exchange; your claim
is an entry in a ledger, much like your claim for your deposits at a bank. An exchange might
justify this as a security measure: it is holding your Bitcoin in a “cold” wallet that is off-line and therefore less
vulnerable to hacking. But, as Nicholas Weaver has written: “If Bitcoin is the ‘Internet of money’, what does it say that
it cannot safely be stored on a computer connected to the internet?”

If the exchange uses a ledger to record customers’ assets, there is no assurance that the
exchange actually has the amount of a particular crypto-asset equal to its customers’
claims. Much like banks are only required to hold a small fraction of customer deposits in
cash (aka fractional reserve banking,) the exchange could operate with less than the total
customer claims.

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A recent paper by Ross Anderson and others suggests this practice may be quite common.
Anderson and colleagues say some exchanges do not actually book customer transactions on
the blockchain; they simply record in their own ledger changes in customer holdings.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Ransomware
Crypto is often used for ransomware attacks—regulation could stop these attacks,
which are both “a criminal menace and national security threat”
Nakashima 21—Nakashima, Ellen. U.S. aims to thwart ransomware attacks by cracking down on crypto
payments. 2021, from https://www.washingtonpost.com/business/2021/09/17/biden-sanctions-ransomware-
crypto/

[Ellen Nakashima is a national security reporter with The Washington Post. She was a member of two
Pulitzer Prize-winning teams, in 2018 for coverage of Russia's interference in the 2016 election, and in 2014
and for reporting on the hidden scope of government surveillance.]

The Biden administration is moving to disrupt the system supporting ransomware attacks,
with the Treasury Department preparing to sanction financial exchanges that facilitate
delivery of illicit digital payments to hackers, according to U.S. officials.
The sanctions could be imposed as early as next week, said a person familiar with the matter, who like others
interviewed for this report, spoke on the condition of anonymity to discuss an initiative that is not yet public.
The move is part of a broader administration strategy to deter ransomware attacks, in
which cybercriminals lock up victims’ computers with data-encrypting malware and then
demand exorbitant fees to unlock them. Those fees are generally paid in cryptocurrency, a
digital form of money traded through a series of private wallets and public exchanges that can be difficult to track.

Ransomware is now seen by the U.S. government as both a criminal menace and national
security threat. Attacks this year attributed to Russia-based groups have led to the
shutdown of a major fuel pipeline and the nation’s largest meat supplier. President Biden warned
President Vladimir Putin in June that he expected Moscow to crack down on activity emanating from Russia, and
renewed his warning in July, saying the United States would take “any necessary action” to defend critical
infrastructure against cyberattack.

Despite such warnings, attacks continue, the FBI said.

The Treasury Department and White House declined to comment Friday.

The sanctions’ aim would be to disrupt the illicit financial underpinnings of the
ransomware ecosystem, which often uses digital assets to facilitate the attacks, said one U.S.
official.
Ransomware attacks in the United States more than doubled from 2019 to 2020. The fees demanded to unlock systems
range from several thousand to tens of millions of dollars, making the enterprise highly lucrative for criminals. Some
experts conservatively estimate that hackers received $412 million in ransom payments last
year.
“There is a concerted effort to identify tools that can disrupt the flow of money to ransomware operators,” said a
second U.S. official. Sanctions are one such tool. “This is a continuation of our effort to go after criminal enterprises
and their money.” The Treasury Department’s planned move was first reported by the Wall Street Journal.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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SQ Inadequate
US regulators have thus far worked with current laws rather than developing a
new and needed framework for cryptocurrency regulation—we need effective
regulation to decrease volatility and increase adoption from institutional investors
Araya 18—Araya, Daniel. (2018). The future of cryptocurrency regulation. Retrieved 2 October 2021, from
https://www.brookings.edu/blog/techtank/2018/10/10/the-future-of-cryptocurrency-regulation/

[Daniel Araya is Senior Partner with the World Legal Summit and Senior Fellow with the Centre for
International Governance Innovation (CIGI). His work contributes to research on autonomous systems in
global governance looking specifically at policy and planning on new and emerging technologies. He has a
doctorate from the University of Illinois at Urbana-Champaign.]

Despite attempts at regulation offered by governments around the world, the rise of
cryptocurrencies remains a challenge. The U.S. approach to regulating the industry has
been to work within its current laws rather than introduce new ones. This has been
arguably shortsighted. The vacuum in effective regulation has ensured that market
manipulation remains a wide-scale problem. Without some degree of protection for
investors, for example, this has meant that institutional investors remain on the sidelines,
significantly limiting the size of the market.

Going forward, many entrepreneurs remain afraid of punishment by the SEC for lack of guidance. Meanwhile,
regulatory uncertainly has limited the kinds of investors pursuing cryptocurrencies. This may be changing but it will
require creative solutions to better govern the market in order to:

 Reduce the number of phony ICOs.

 Properly regulate cryptocurrencies (beginning with a self-regulatory body).
 Develop proper assurance systems to protect investors against fraud.
 Provide institutional quality custody solutions to safeguard crypto assets.

In the near future, we can be sure that ICOs and the cryptocurrency market as a whole will
be increasingly subject to regulation. This is a very good thing. A cryptocurrency market
that is effectively regulated will mean a decrease in the herd-driven volatility exciting the
market—even as the value of cryptocurrencies continues to rise.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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US federal government bodies all regulate crypto differently, hampering

“desirable innovation”—federal policy towards crypto needs to change
Goforth 18—Goforth, C. (2018). U.S. Law: Crypto is Money, Property, a Commodity, and a Security, all
at the Same Time. Retrieved 2 October 2021, from https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=3272975

[Professor Carol Goforth specializes in business associations and securities regulation, and she has
become a leading expert on the regulation of cryptoassets and transactions. She works at the University of
Arkansas School of Law.]

This brief article comments on the consequences of having cryptoassets simultaneously

regulated in the U.S. by the I.R.S. (as property), FinCEN (very much like money), the
CFTC (as commodities), and the SEC (as securities). While the first cryptoassets were indeed all “true”
cryptocurrencies (interests designed to supplant the role of government-backed fiat currency), many crypoassets today
have other functionality. Unfortunately, the tendency of each regulatory agency to regard all or
virtually all cryptoassets alike has produced a set of overlapping rules and requirements
that is likely to hamper appropriate and desirable innovation in this space. This article
suggests that regulatory agencies move away from regulating crypto monolithically, and
instead take a more nuanced approach that looks at the genuine functionality of the asset as
well as the motivations of those involved in issuing or exchanging such interests.

The US Federal Government is antagonistic toward crypto firms, rather than

working with them
Levine 21—Levine, Matt. Crypto Regulators Aren’t Very Sympathetic (2021). Retrieved 3 October 2021,
from https://www.bloomberg.com/news/newsletters/2021-09-22/crypto-regulators-aren-t-very-sympathetic-
ktvrpa5i

[Matt Levine is a Bloomberg Opinion columnist covering finance. He was an editor of Dealbreaker, an
investment banker at Goldman Sachs, a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz,
and a clerk for the U.S. Court of Appeals for the 3rd Circuit.]

And the specific complaint is not that crypto people disagree with regulators’ decisions, but
that the regulators are just not interested in working with them at all:

Crypto executives say they’re frustrated that regulators are threatening to sue them,
rather than giving them guidance on how they can stay within the law.
Last week, BlockFi CEO Zac Prince at the SALT Conference in New York said the SEC and other regulators
needed to give his industry clarity on what’s allowed. Five states have already taken action against his firm,
accusing it of offering unregistered securities to their residents. Prince at the conference said federal guidance
is needed, rather than state actions.

If you’re a bank you have examiners in the building, and you talk to them regularly, and you have built up a level of
trust between your lawyers and your regulators,[2] and you have various formal and informal ways to run things by
them. But also you are very confident that like 99% of your business is totally legal; you occasionally go to regulators
with gray-area things but mostly there is broad agreement that the bones of the business are fine. If you’re a
crypto exchange you can call up the SEC and say, like, “is it legal to be a crypto exchange,”
and they just won’t return your call, but the odds of them just suing you tomorrow on the
theory that it is illegal to be a crypto exchange are not zero. Is it legal to be a decentralized

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finance platform? A crypto lending platform? Are you sure? You’ll find out when they sue
you.
Also this, from the Coinbase story, made me laugh:

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Stablecoins
Stablecoins, which underlie DeFi, can collapse from bank runs of rug pulls—they
need regulation
Bieber 21—Why Mark Cuban Thinks Crypto Needs More Regulations. (2021). Retrieved 3 October 2021,
from https://www.fool.com/the-ascent/cryptocurrency/articles/why-mark-cuban-thinks-crypto-needs-more-
regulations/

[Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has
been featured on major outlets including MSN Money, CNBC, and USA Today.]

Stablecoins are a subgroup of cryptocurrency investments. They are meant to be more

stable than many other cryptocurrencies because they are pegged to widely used fiat
currency, such as the U.S. dollar, or because they are pegged to commodities such as gold.

They're also a critical component of the decentralized finance (DeFi) space, which is meant

to serve as a foundation for an open financial system that gives the power to people rather
than central banks or large financial institutions.
Cuban has praised DeFi, and he invested in a specific stablecoin called TITAN, which was part of the Iron Finance
Investment project. Iron Finance describes itself as a "multi-chain partial-collateralized DeFi and algorithmic stablecoin
ecosystem"

Unfortunately, [thestablecoin] TITAN collapsed and quickly lost nearly all of its value.
Initially, the collapse appeared to be the result of an exit scam called a "rug pull," that
occurs when DeFi developers steal user funds. However, Iron Finance later explained that a
"bank run" on its protocol caused the collapse.
Whatever the reason, Cuban lost most of the money he had invested in TITAN when the price of the stablecoin fell
from $65 to $0.00000003. Although he didn't disclose the exact amount, he indicated in a statement to Bloomberg that
it was enough that he "wasn't happy about it."

While the billionaire investor indicated that there are "risks I take on with the goal of not just trying to make money but
also to learn," he still believes that the takeaway lesson from the experience was that more crypto regulation is needed
when it comes to stablecoins.

"There should be regulation to define what a stablecoin is and what collateralization is

acceptable," Cuban said. Cuban believes this is essential because lots of new players will
aim to establish stablecoins over time. To protect investors, he believes the "math of the
risks" should be "clearly defined for all users and approved before release."
Unfortunately, lawmakers are still struggling to determine what types of regulations to impose within the broader
cryptocurrency industry, and the technology is developing so rapidly it's difficult for politicians without a deep
understanding of the space to keep up.

This general lack of consumer protection laws and regulatory oversight is a key reason why investors who are putting
their money into any cryptocurrency -- whether it's stablecoins or other investments -- need to make sure they're aware
of the added risk that comes with volatile, untested, and largely unregulated investment products.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Tax
Regulating crypto will help the US Fed to generate $28 billion in revenue to pay for
infrastructure
Boucher et al. 21—Cryptocurrency Regulation and Enforcement at the US Federal and State Levels |
JD Supra. (2021). Retrieved 3 October 2021, from https://www.jdsupra.com/legalnews/cryptocurrency-
regulation-and-1771163/

[Jamie Boucher is head of Skadden’s Financial Institutions Regulatory and Enforcement Group and the
global anti-money laundering and sanctions practice. Her clients include U.S. and international banks,
thrifts, mortgage lenders, insurance, securities, money service businesses and investment companies.]

On August 10, 2021, the U.S. Senate passed a $1 trillion bill aimed at increasing

infrastructure funding over the next eight years. To help pay for these expenditures, the
Senate included a provision imposing reporting requirements on cryptocurrency “brokers,”
with estimates that such reporting would allow the Internal Revenue Service to collect an
additional $28 billion in tax revenue over 10 years. But the broad definition of broker — any person
responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person —
sparked significant backlash throughout the cryptocurrency community, resulting in several days of proposals and
counterproposals among legislators. While the original definition remained in place, the debate marked the most
serious consideration of a cryptocurrency issue by either chamber of Congress.

Regulation
On September 21, 2021, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an updated
advisory about the sanctions risks of facilitating ransomware payments using cryptocurrencies. OFAC’s advisory
reminds organizations that it applies a strict liability standard when imposing civil penalties for sanctions violations.
Thus, organizations may be liable for making a ransomware payment even if they do not know that the recipient has
been designated a malicious cyber actor by OFAC. If a payment is made to a sanctioned entity, the advisory noted that
OFAC would consider in its enforcement response: (1) whether the organization took meaningful steps to reduce the
risk of extortion by a sanctioned actor, citing practices highlighted in the Cybersecurity and Infrastructure Security
Agency’s (CISA) September 2020 Ransomware Guide; and (2) whether the organization reported the attack “to
appropriate U.S. government agencies,” as well as “the nature and extent of [any] cooperation with OFAC, law
enforcement, and other relevant agencies, including whether an apparent violation of U.S. sanctions is voluntarily self-
disclosed.”

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Terrorism
Although cryptocurrencies aren’t widely used by terrorists, regulation should be
put in place to ensure future cryptocurrencies aren’t used by terrorists
Dion-Schwartz et al. 21—(2021). Retrieved 3 October 2021, from
https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3026/RAND_RR3026.pdf

[Cynthia Dion-Schwarz, Ph.D., a Research Staff Member at the Institute for Defense Analyses at the time of
this writing, is currently a staff member in the Office of the Secretary of Defense (Program Analysis and
Evaluation).]

Concerns about the use of cryptocurrency to enable terrorist activities have yet to
manifest, but coming improvements in cryptocurrency technologies will likely have
a significant long-term effect on terrorism finance. The speed at which these
technologies are adopted, and the details of which technologies are used and how they are
deployed, are critical uncertainties that have important operational impacts. This analysis
suggests that regulation and oversight of cryptocurrencies, along with international
cooperation between law enforcement and the intelligence community, would be
important steps to prevent terrorist organizations from using cryptocurrencies to
support their activities.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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US Leadership
The US is poised to convene 30 countries to address crypto regulation
Lyngaas 21—Lyngaas, S. (2021). First on CNN: Biden administration to convene 30 countries to crack
down on ransomware threat. Retrieved 3 October 2021, from
https://www.cnn.com/2021/10/01/politics/blinken-cybersecurity-alliance/index.html

The White House will convene a 30-country meeting this month to try to ramp up global
efforts to address the threat of ransomware to economic and national security, President
Joe Biden said in a statement shared exclusively with CNN.
"Cyber threats affect the lives and livelihoods of American families and businesses," national security adviser Jake
Sullivan said in a statement to CNN. Sullivan said the administration would "continue to build on our whole-of-
government effort to deter and disrupt cyberattacks."

The goal of the alliance will be "to accelerate our cooperation in combatting cybercrime,
improving law enforcement collaboration, stemming the illicit use of cryptocurrency, and
engaging on these issues diplomatically," Biden is set to announce Friday, according to the statement.
The announcement follows a series of ransomware attacks on US critical infrastructure firms in recent months,
including one that forced major US fuel supplier Colonial Pipeline to shut down for days.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Whales
Crypto whales should be regulated
Dion-Schwartz et al. 21—(2021). Retrieved 3 October 2021, from
https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3026/RAND_RR3026.pdf

[Cynthia Dion-Schwarz, Ph.D., a Research Staff Member at the Institute for Defense Analyses at the time of
this writing, is currently a staff member in the Office of the Secretary of Defense (Program Analysis and
Evaluation).]

Regulatory crackdown is here for crypto. As usual, it centers on whether certain offerings should be classified as
securities. Because if something is a security in the government’s eyes, a lot of regulatory strings start getting attached.
I think this is barking up the wrong tree. The risk in crypto is not in products, it’s in people. If
regulators shift their focus in that direction, there’s a way everyone can win.

Start at square one. The

government's mission is to protect investors. From what? Mostly the
behavior of bad actors. Bad actors in the financial realm take the role of leaders (Elizabeth Holmes) and con
artists (Bernie Madoff). There are of course regulations that aim to limit individuals from market or systemic risk, but
those risks are rarely known before they do damage. The regulatory system is mostly to deter and detect bad actors.

There’s a big catch applying this to crypto-land. There are no authorities or institutional
checkpoints in the cryptographic architecture. No one has access to alter any of the
fundamental properties of each token. It’s all there, transparent, and in the instances where it can
adapt and change, it does so according to a pre-set protocol.
The risk to crypto investors is not that they might one day find out that the product they bought isn’t what they were
told. There’s no faking blood samples or cooking the books. The risk in crypto is the volatility that’s
inherent to the asset class. The risk is that at any moment, the price of the thing they bought
can come crashing down without reason or warning.

It follows that the people who pose a threat are those with the most ability to move the
markets.

Those people are whales, investment vehicle providers, fund managers, token creators. The
crypto VIP. In this new wild west, they have the effective power of an activist investor — something between a
CEO and a hedge fund. It makes sense to begin regulation by imposing trading rules and disclosure requirements akin
to the constraints of these groups in traditional markets, to crypto owners who meet some certain market-cap threshold
in any given asset. Of course, that would mean transparency of wallets and ownership, which could indeed be a
herculean task… but the IRS may well be laying the groundwork for bringing some of this anonymity out of the
shadows already.

Corporate CEOs today can trade their stock but must file advance warnings and each move
is registered with the SEC. Hedge-funds with assets over $100 million must disclose holdings quarterly.
Employees at financial institutions with access to non-public information are subject to onerous trading rules and
holding periods.
Adapting these rules to the crypto world would bring important transparency to an
industry that’s subject to huge swings based on the words and actions of its biggest
investors and proselytizers – Example No. 1 being Mr. Elon Musk and dogecoin.
Take this argument to the extreme and it may even open a path to avoiding the securities label.
To classify as a security, the owner must have an expectation of profits from the investment.
If the government disallowed crypto VIPs to exchange their tokens for anything other than goods or services, for a
minimum period of say, five years, it would be a bold demonstration that these tokens are more like currencies or a
commodity like gold. No trading or conversion to dollars; only point-of-sale transactions. If crypto holders truly believe
what they say, they should be more than happy to hang onto their currency for as long as the government requires.

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Regulators need not worry that investors don’t know what they’re buying. We should all worry about extreme, crushing
volatility. Build the guardrails around those who have the power to create it, and everyone
wins.

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Pro Blocks

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AT: Anonymity
Regulating crypto might mean un-anonymizing it—but it’s worth the cost to grow
the crypto space, protect investors and stop fraud and crime
Locke 21— Mark Cuban says crypto regulation ‘built around existing fraud laws’ wouldn’t necessarily be a
bad thing. (2021). Retrieved 2 October 2021, from https://www.cnbc.com/2021/09/16/mark-cuban-says-
crypto-regulation-wouldnt-be-a-bad-thing.html

[Taylor Locke is a money reporter at CNBC]

[Mark Cuban is an American billionaire entrepreneur, television personality, and media proprietor whose net
worth is an estimated $4.3 billion, according to Forbes, and ranked #177 on the 2020 Forbes 400 list.]

The subject of additional regulation in the crypto space has been especially buzzy lately, and on Tuesday, Gary
Gensler, chairman of the Securities and Exchange Commission, told the Senate Banking Committee that the SEC
is working overtime to create a set of rules for crypto markets to protect investors, among other things.
In response, both the crypto community and its critics have shared their own thoughts. Among those speaking up is
billionaire investor Mark Cuban.

“Personally, I think regulation built around existing fraud laws is not a bad thing,”
Cuban tweeted in a thread on Thursday. “It will require Proof of Authorship and identity,
but it won’t hurt innovation, nor slow anything down.”
Instead, regulation will “open the door for more people to confidently use ‘crypto,’” Cuban
tweeted.

Cuban acknowledged that a form of proof of authorship would remove the anonymity some
prefer to maintain in the crypto community, but ultimately, he thinks the good of
mandating such a thing would outweigh the bad.

“Ifyou require Proof of Authorship for Smart Contracts ... the feds and [potential fraud]
victims will have a person/entity to sue or indict,” he said. “Probably at the cost of
anonymous innovators, but that’s the price that will be paid.” (Smart contracts are collections of
code that carry out a set of instructions on the blockchain.)

Cuban also predicted which areas he thinks will be increasingly regulated, according to his current understanding of the
crypto space.

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AT: Bitcoin Energy Use

More than half of bitcoin’s energy use is sustainable
Holmes 21—Holmes, F. (2021). Bitcoin Mining Uses A Higher Mix Of Sustainable Energy Than Any
Major Country Or Industry. Retrieved 5 October 2021, from
https://www.forbes.com/sites/greatspeculations/2021/07/06/bitcoin-mining-uses-a-higher-mix-of-sustainable-
energy-than-any-major-country-or-industry/?sh=5369a81e4cc9

Bitcoin Network a Far Bigger Consumer of Sustainable Energy Than Fake News Reports

Besides being an NVIDIA cloud service provider, HIVE is proud to be a founding member of the Bitcoin Mining
Council (BMC), the group conceived in May after recent talks between North American Bitcoin miners, Elon Musk
and MicroStrategy co-founder and CEO Michael Saylor.
In the past couple of months, the global Bitcoin mining network has come under heightened scrutiny over its energy
consumption. Critics, most notably Elon Musk, have tried making the case that Bitcoin uses an unacceptable amount of
electricity generated by fossil fuels, with Musk going so far as to cancel Tesla’s policy of accepting the cryptocurrency
as a form of payment.
Newly compiled research, though, proves just how unfounded these criticisms really are. In its very first report, the
BMC releases results of its survey of over 32% of the current global Bitcoin network, finding that participants are using
electricity with a 67% sustainable power mix. Based on that data, the total sustainable power mix could be
as high as 56%, making Bitcoin mining one of the most sustainable industries globally.
To put that in perspective, the U.S. currently uses electricity that’s only 30.5% sustainable.
For China, that figure is less than 15%.
Take a look at the stunning chart below. Fake news makes Bitcoin out to be the biggest energy guzzler on the planet.
On the contrary, its energy usage is negligible, as it consumes only 0.117% of total global electricity.
There may be many reasons why people spread misinformation about Bitcoin. Much of the misinformation may
originate from Ripple, which is currently under investigation by the Securities and Exchange Commission (SEC). The
fintech firm is believed to employ a great number of bots on Twitter and other social media platforms with the intent of
tearing Bitcoin down in favor of its own XRP coin.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: Bubble
A crash in the crypto market could influence the wider financial markets
Massad 21—(2021). Retrieved 2 October 2021, from https://www.brookings.edu/wp-
content/uploads/2019/03/Timothy-Massad-Its-Time-to-Strengthen-the-Regulation-of-Crypto-Assets-2.pdf

[Timothy George Massad is an American lawyer and government official who served as the chairman of the
Commodity Futures Trading Commission under President Barack Obama. He is an Adjunct Professor of
Law at Georgetown University and graduate of Harvard Law School]

Crypto-assets can provoke intense views, but whether

they are the next big thing or modern-day
Dutch tulips should not determine whether or how we regulate them. There is nothing so
exceptional about crypto-assets that justifies giving them a regulatory pass. Nor should they
be taxed or regulated out of existence. A traditional principle of financial market regulation
in the United States has been to refrain from normative judgments about investments:
require transparency and integrity in markets and let investors make their own decisions.
We should follow that principle here.

The fact that the prices of Bitcoin and other crypto-assets have fallen substantially from the
highs of late 2017 does not diminish the need to act. Digital tokens will be an important part
of our future even if the current leading cryptocurrencies are not. We should create a
reasonable regulatory framework now.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: Congress Uninformed

Congress isn’t directly regulating crypto—many things in the US are regulated.
Although each congressperson isn’t an expert in transportation and building
codes and food safety, we still make laws to regulate these things for the sake of
public safety

Klein 21—Opinion | The Way the Senate Melted Down Over Crypto Is Very Revealing. (2021). Retrieved 2
October 2021, from https://www.nytimes.com/2021/08/12/opinion/senate-cryptocurrency.html?searchResultPosition=6

[Ezra Klein joined Opinion in 2021. Previously, he was the founder, editor in chief and then editor-at-large of
Vox; the host of the podcast, “The Ezra Klein Show”; and the author of “Why We’re Polarized.” Before that,
he was a columnist and editor at The Washington Post, where he founded and led the Wonkblog vertical.]

“Let’s recognize if we gathered all 100 senators in this chamber and asked them to stand up
and articulate two sentences defining what in the hell a cryptocurrency is, that you would
not get greater than five who could answer that question,” Senator Ted Cruz, Republican of
Texas, said on Monday. His point was simple: Congress doesn’t understand crypto, so it
shouldn’t regulate it.

I’ll be generous and say Cruz has this one half right. Congress
doesn’t have the expertise to directly
regulate the crypto markets, but then, Congress isn’t proposing to directly regulate the
crypto markets. It’s empowering the Treasury Department to do so. Tucked inside the trillion-
dollar infrastructure bill is a provision reinforcing the Treasury Department’s authority to force tax compliance from
the “brokers” who are part of those transactions. This was a rare bit of tax policy members of both parties could agree
on. It was added to the legislation by Senator Rob Portman, an Ohio Republican, and backed by the Biden
administration.

“The tax enforcement agenda the president has put forward is focused on — and this is
basic — having people pay the taxes that are owed under current law, ” David Kamin, a deputy
director of the National Economic Council, told me. “Disproportionately, there is evasion when it comes
to those at the top, often because their sources of income are more opaque.” And no market
is more opaque right now than the crypto markets.
Portman’s proposal gave the Treasury Department broad authority to define “brokers” in the crypto markets, and
compel them to issue 1099s and comply with the tax code. The proposal was too broad, in the eyes of the crypto
community, which mounted a furious lobbying effort against it. “I don’t know how Treasury will use that authority,”
said Jerry Brito, executive director of Coin Center, a crypto advocacy group. “I fear they’ll use it in a way that has
unintended consequences because they don’t understand the technology.”

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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AT: Crime
It can be easier for law enforcement to recover ransoms paid in bitcoin—and less
easy for those paid in fiat currency, because banks don’t always cooperate with
law enforcement
Sorkin & Livni 21—Andrew Ross Sorkin and Ephrat Livni. Crypto’s Top V.C. Is Playing the Long Game.
(2021). Retrieved 2 October 2021, from https://www.nytimes.com/2021/06/26/business/dealbook/katie-haun-
crypto.html?searchResultPosition=2

[Andrew Ross Sorkin is a columnist for The New York Times and the founder and editor-at-large
of  DealBook, an online daily financial report published by The Times that he started in 2001. In addition, Mr.
Sorkin is an assistant editor of business and finance news, helping guide and shape the paper’s coverage.]

[Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously,
she was a senior reporter at Quartz, covering law and politics.]

[Interviewee: Katie Haun, is a former presecutor and a co-chair of Andreessen Horowitz’s new $2.2 billion
crypto fund, is betting that the blockchain will be as big as the internet.]

As a former prosecutor, how do you think about crypto being used in so many ransomware attacks like the one on
Colonial Pipeline? Why do criminals love Bitcoin so much?

Criminals are early adopters and in some ways they make great beta testers for new
technology. They’re always looking for a way around the system. Frankly, law enforcement
officials actually really like when payment is made in Bitcoin as opposed to fiat. I think it’s
funny because as a former prosecutor, I take this for granted. There’s a real false sense of security where wires are used
or traditional financial services are used. People think, “Oh, we know everything about that. So we’ll just go subpoena.
The bank will give us these records and we’ll just go get the money.” That is just so far from the reality of the situation.

So you don’t believe that these ransomware attacks are a function of crypto?

I think you are asking if crypto is the cause of ransomware, and it’s absolutely not. I
prosecuted many of the Justice Department’s largest online money laundering schemes. In
fiat systems, 99.9 percent of money laundering claims succeed. Actually, the thing that
really stands out about the ransomware attacks — the Colonial Pipeline is a great example
of this. It is unprecedented that the Justice Department would be able to recover the
proceeds from international criminal activity so quickly. That timeline is usually years, if
ever.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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AT: Financial System Threat

Cryptocurrencies will supplement and improve the current financial system, not
undermine it
Smith 21—Smith, S. (2021). Crypto Needs Sensible Regulation, Not Regulation Via Lawsuits. Retrieved 3 October
2021, from https://www.forbes.com/sites/seansteinsmith/2021/09/14/crypto-needs-sensible-regulation-not-regulation-
via-lawsuits/?sh=341b09bc7265

[Sean Stein Smith is a professor at the City University of New York – Lehman College. I serve on the
Advisory Board of the Wall Street Blockchain Alliance, where I chair the Accounting Work Group. I am also
the chairperson of the NJCPA's Emerging Technologies Interest Group (#NJCPATech).  ]

Regulate, don’t dictate. A trend that is increasing common among regulators the world over is to regulate and attempt
to establish the rules of the marketplace via edict and enforcement actions rather than robust analysis and conversation.
Tempting in the short term, such an approach leads a rigid, inflexible, and ultimately fragile regulatory framework;
robust and durable regulations require input and dialogue from all interested market actors.

Attempting to regulate the blockchain and cryptoasset space via edict, lawsuits, and compliance-oriented activities is
likely to result in the following outcome. Given the global and decentralized nature of both blockchain and
cryptoassets, the industry, associated organizations, and capital that accompanies it will likely move to jurisdictions
more amendable to its future growth. Regulation by edict rarely works, and is unlikely to work in an industry so fluid
and dynamic as crypto continues to prove to be.

Opportunity versus threat. A

common, and misinformed, opinion that continues to permeate the
regulatory conversation around blockchain and cryptoassets is that this technology
represents an existential threat to the incumbent financial system and order. While it is true
that these technologies do represent a paradigm shifting technology in terms of how
individuals and institutions will interact and engage with each other, that does not mean
that these technologies are incompatible with the current regulatory framework.

To the contrary, as stablecoins, central bank digital currencies, and other more centralized
cryptoasset options enter the marketplace, it is increasingly apparent that cryptoassets are
situated to become an integral aspect of the financial system. Rather than viewing these
innovations and assets as a threat, they should be viewed as an opportunity for further
development.
Regulating a space like cryptoassets was never going to be an easy or short-term project, and any individual or
institution that stated as much was either ill-informed or deliberately spreading misinformation for ulterior motives.
Blockchain and cryptoassets represent the single largest breakthrough in technology and financial innovation in
decades, and it is perfectly natural for regulatory bodies to be highly interested in the space. That said, simply because a
technology is new and innovation does not mean regulation should be heavy handed. Rather, policymakers and
rulemaking agencies should be both aware of the opportunity aligned with crypto, and willing to make rules to help
foster its future development.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: No Innovation
Regulation won’t stop innovation—especially under Biden
Livni 21—Elphrat, Livni. What’s Next for Crypto Regulation. (2021). Retrieved 2 October 2021, from
https://www.nytimes.com/2021/01/30/business/dealbook/crypto-regulation-blockchain.html?
searchResultPosition=1

[Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously,
she was a senior reporter at Quartz, covering law and politics.
She studied journalism at Boston University, religion at Columbia University, and law at the City University
of New York.]

There is a lot going on in crypto right now. Some say too much, too fast. Others complain that the United States is too
slow, falling behind because its rules are outdated and unfit to address the inventions that blockchain technology has
created.

But markets and regulators have been here before. “The

basic, overarching issue is that digital asset
innovation has outpaced our regulatory framework,” said Timothy Massad of Harvard, who
is formerly the chairman of the Commodity Futures Trading Commission and has written extensively about crypto
asset oversight. “That’s not unusual. There’s always a tension between innovation and
regulation.”

It is not problematic, he said, unless regulators wait for a crisis and then respond in a rush,
which they often do. “Regulation won’t stop innovation,” Mr. Massad said, “unless it’s done
badly.”

But there is reason to believe the Biden administration’s financial regulators will be crypto savvy, based largely on the
fact that Gary Gensler, the nominee for chairman of the Securities and Exchange Commission, has taught courses on
blockchain and digital currencies at M.I.T. Let’s drop in on a class to get a sense of him as a regulator …

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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AT: State Regulation

Cryptocurrencies are international—so for the US to become a leader in the field,
we need national regulation
Massad 21—(2021). Retrieved 2 October 2021, from https://www.brookings.edu/wp-
content/uploads/2019/03/Timothy-Massad-Its-Time-to-Strengthen-the-Regulation-of-Crypto-Assets-2.pdf

[Timothy George Massad is an American lawyer and government official who served as the chairman of the
Commodity Futures Trading Commission under President Barack Obama. He is an Adjunct Professor of
Law at Georgetown University and graduate of Harvard Law School]

Congress needs to fix this by creating regulatory oversight of the cash market for crypto-assets, and the trading
platforms and other intermediaries that operate in that market. Either the SEC or the CFTC is competent to regulate this
area if given the power; it would be inefficient to create a new agency.

I recommend making the SEC the lead agency. We

should not defer to state law in regulating crypto-
assets. This market strives to be international and is best served by a national regulatory
framework. The variation in international regulation of crypto-assets should not cause us to
hesitate in moving forward; it creates opportunity for the U.S. to exert global leadership.
The 2012 law regulating crowdfunding is a good model for Congressional action. That law set principles similar to
ones we have followed in the securities and derivatives markets, and left it to the SEC to figure out the details and
implement regulations. Congress should do the same thing here.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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AT: Volatility
Non-unique: cryptocurrency is volatile and potentially risky, but so are stocks
Kominers 21—Regulating the unregulated cryptocurrency market. (2021). Retrieved 3 October 2021,
from https://news.harvard.edu/gazette/story/2021/09/regulating-the-unregulated-cryptocurrency-market/

[Interviewer: Christina Pazzanese is a staff writer at The Harvard Gazette, covering national and world
affairs. Her work has also appeared in The Washington Post, The Boston Globe, and the late Boston
Phoenix.]

[Interviewee: Scott Duke Kominers  ’09, A.M. ’10, Ph.D. ’11, is the MBA Class of 1960

Associate Professor of Business Administration at Harvard Business School  and a faculty affiliate of
Harvard’s Department of Economics  and the  Harvard Center of Mathematical Sciences and Applications.
He advises crypto businesses and projects, including Facebook’s digital wallet and payment system, and
holds crypto currency and other crypto assets. Interview has been edited for clarity and length.]

GAZETTE: Some lawmakers have pointed to the GameStop stock trading frenzy in early 2021
as analogous to the crypto market, saying that most ordinary investors have gotten caught
up in hype and don’t fully understand the risks they’re taking.

KOMINERS: First of all, it’s

important to note that the GameStop run-up wasn’t in a new
trading arena — it was Internet-hyped trading of a specific stock in the regular stock
market. That said, the GameStop story is in some sense analogous to the meme trading of crypto products like
Dogecoin — there’s consumer confusion around the idea that these assets could lose value. A lot of people lost a lot of
money in the GameStop and Dogecoin run-ups and crashes. They were on a platform that made trading feel like a
video game, and didn’t understand the real risks. And so in those ways, it’s analogous. Consumers and
investors need to understand that these are high variance, speculative assets.
But when you get to the technology infrastructure pieces, GameStop and crypto can look very different.

Cryptocurrency trading now looks a lot like equities trading — you have a brokerage account at an exchange, or
potentially on a platform like Robinhood. But for many of the other crypto applications, the infrastructure is very, very
new, and the platforms are very, very new, and they’re not heavily protected.

I think we’ll see more regulation around messaging and communication, but there are also more structural questions.
For example, one of the regulatory conversations is around stablecoins — crypto assets that hold nominally fixed
values because they’re designed to just be used for moving money from one place to another in a fixed denomination.
They’re typically backed by reserves in a way similar to how banks back their loans with deposits. But there are
questions about how to properly structure those reserves. If everyone simultaneously decided they wanted to divest,
will stablecoins have the reserves to support that? I expect to see regulation around allowable assets and reserve design
— just like we have with banks.

And finally, we’ll need regulation to ensure open competition among different crypto products and platforms.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Con

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Ban Crypto
Regulation legitimizes cryptocurrency; the US Fed should follow China’s suit and
ban it entirely to ensure financial stability and cut CO2 emissions
Volpicelli 21—Volpicelli, Gian. China’s Sweeping Cryptocurrency Ban was Inevitable. 2021, from
https://www.wired.com/story/chinas-sweeping-cryptocurrency-ban-inevitable/

[Gian M. Volpicelli is a senior editor at WIRED UK. Born in Rome but based in London, he co-edits the Start
section of the magazine and writes and edits stories about cryptocurrency, technology regulation, and digital
politics.  ]

Several exchanges, wallets, and other cryptocurrency companies have announced that they will stop providing
services to users in mainland China and enforced a sweeping block of all Chinese IP addresses on their services. Given
the wording of the official document, which explicitly singles out overseas exchanges catering to Chinese residents, the
industry appears to have taken an overcautious approach. “How much individual citizens will be threatened by the new
level of enforcement remains to be seen,” says Luisa Kinzius, a director at China-focused consultancy Sinolytics.
“[But] the announcement is also targeting any Chinese citizen working for crypto-related companies abroad, declaring
their work as illegal and putting them at risk of being legally investigated.”

The ramp up of China’s repression of bitcoin and other cryptocurrencies was always going to happen. Crypto’s
borderless and unregulated nature runs counter to the Chinese government’s vision for a state-dominated economy. In
addition, Beijing sees cryptocurrencies as the epitome of mindless guesswork. “The Chinese government just restated
in its new 14th five-year plan— China’s economic planning outline for the next five years—that the financial system
should primarily serve the real economy, not speculation,” Kinzius says. “ China is very hesitant towards
pure financial speculation due financial stability concerns—and, of course, cryptocurrency
is very much driven by speculation.”

China announced its

Those general concerns are now compounded by recent developments. In September 2020,
plan to end its year-on-year growth of CO2 emissions by 2030 and become carbon neutral
by 2060. That necessarily entails a crackdown on cryptocurrency mining, the energy-
consuming and often carbon-belching process used to maintain a cryptocurrency’s network,
which Chinese authorities regard as having almost no benefit for the country's economy. On the other hand, China is
currently piloting its Digital Chinese Yuan, a state-backed digital currency designed to offer the surface-level
convenience of cryptocurrency with none of the privacy and decentralization benefits of it—or, arguably, its lack of
governmental oversight. From Beijing’s point of view, to allow the coexistence of the Digital Chinese Yuan with any
other virtual asset doesn’t make sense. China, Kinzius says, was interested in “avoiding competition [from]
cryptocurrencies,” especially as it prepares to make the Digital Chinese Yuan available to foreign users during the 2022
Beijing Winter Olympics.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Cryptocurrency has many disadvantages to fiat currency, no real advantages, and

will never work to unseat the US dollar
Frankel 21— (2021). El Salvador’s Adoption of Bitcoin As Legal Tender Is Pure Folly. Retrieved 2
October 2021, from https://www.belfercenter.org/publication/el-salvadors-adoption-bitcoin-legal-tender-pure-
folly

[Jeffrey Frankel is James W. Harpel Professor of Capital Formation and Growth. He was appointed to the
Council of Economic Advisers by President Clinton in 1996, and subsequently confirmed by the Senate. He
received his PhD from MIT]

El Salvador this month became the first country to adopt a cryptocurrency – in this case, bitcoin – as legal tender. I say
the first because others might follow. But they should think twice because the idea is highly dubious – and likely to be
economically dangerous for developing countries in particular.

I will admit that I

don’t understand the need for cryptocurrencies at all. Like many economists,
I fail to see what problem they solve. They aren’t well designed to fulfill any of the classic
functions of money – a unit of account, store of value, or means of payment – because their
prices are so extraordinarily volatile. This volatility is not surprising, because cryptocurrencies are backed
neither by reserves nor by the reputation of a well-established institution, such as a government or even a private bank
or other trusted corporation.

In fact, bitcoin and its fellow cryptocurrencies were born from an anarcho-libertarian distrust of central banks. True,
many central banks, especially in developing countries, have a history of debasing their currencies. But adopting
bitcoin as legal tender makes little sense for El Salvador.

In 2001, El Salvador adopted the US dollar as legal tender to ensure the monetary stability that the country’s national
currency, the colón, had historically failed to deliver. The reform worked: the country’s annual inflation rate, which had
substantially exceeded 10% between 1977 and 1995, has declined markedly since the adoption of the dollar. It has been
below 2% since 2012, and close to zero since 2015 – a rarity in Latin America.

Giving up the monetary independence afforded by issuing one’s own currency carries costs – particularly, the loss of
the ability to adjust monetary policy in response to local economic conditions. El Salvador already accepted this when
it adopted the dollar. The costs would be even greater if a currency as unstable as bitcoin were the sole national
currency. But President Nayib Bukele instead decided to designate both bitcoin and the dollar as legal tender. The logic
behind that decision is surreal.

Bitcoin has not been well received in El Salvador. Domestic residents don’t want to be obliged to accept it.
International markets also are unenthusiastic. Moody’s downgraded El Salvador’s debt in July, and S&P could follow
suit. The spread between the interest rate that the government must pay on its debt and the US Treasury rate
has increased sharply since the plan to bitcoinize was first announced in June.

There is one function that cryptocurrencies do appear to serve: facilitating illegal

transactions. Needless to say, this is not a use that should be encouraged. Even worse in
terms of the general welfare, “mining” cryptocurrencies such as bitcoin – which relies on
blockchain technology to verify transactions – requires staggeringly large amounts of
energy and thus harms the environment.

Moreover, even if one accepts a role for one or two cryptocurrencies, the number that has
been created is bafflingly large: anywhere from 6,000 to 11,000 (or as many as 70,000 digital
tokens). The entire notion of the usefulness of money is that people choose to use the same
currency that others do, thereby minimising transaction costs. They can’t evaluate and keep

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track of the creditworthiness of dozens of issuers. Money is a sort of natural monopoly,

which is why governments long ago took over responsibility for its provision.

In the mid-19th-century US, for example, private banks and other institutions issued an estimated 8,000 competing
private currencies. As US Federal Reserve governor Lael Brainard has noted, that period “is now notorious for
inefficiency, fraud, and instability in the payments system”. This is essentially why central banks were created.

The logic that works against a large number of currencies at the national level also applies
internationally. This is one reason why the dollar remains by far
the leading global currency. The world does not have room for 11 international currencies,
let alone 11,000.

If the chronic US fiscal and current-account deficits had resulted in a strong long-term downward trend in the
dollar’s value, one could imagine people shifting away from the greenback and seeking alternatives. But this has not
happened, and particularly not during the period in which cryptocurrencies have risen. And US inflation was
remarkably low during this time (though lately, it has risen in tandem with the economic recovery).

Some, including Bukele, claim that cryptocurrencies will bolster financial inclusion by
giving unbanked people access to financial services and lowering transaction costs for small
cross-border payments such as migrants’ remittances. The latter is particularly important to El
Salvador, having averaged about 20% of GDP annually over the past two decades.

But bitcoin is unlikely to be the solution. Other means of bringing down such transaction
costs appear more promising. And holding or transacting in such an unstable asset is a
particularly bad idea for people with low incomes, who can ill afford to sustain price swings
as large as 30% in a single day. Bitcoin has quadrupled in price over the last year, which is
part of the attraction. But what goes up also comes down.

Another disadvantage is that even the digitally savvy run the risk of forgetting passwords and losing their bitcoin. And
at least half of El Salvador’s population have no access to the internet in the first place.

Many aspects of cryptocurrencies are baffling, not least the success of a joke such as Dogecoin. But El Salvador’s
adoption of bitcoin as legal tender is perhaps the strangest and potentially most worrying example of all.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Capital Flight
Regulation causes companies to flee, along with billions of dollars in capital and
investments—as Binance did by fleeing from China to Japan, and as FTX did in
moving from Hong Kong to the Bahamas
Qin & Livni 21—China Cracks Down Harder on Cryptocurrency With New Ban. (2021). Retrieved 2
October 2021, from https://www.nytimes.com/2021/09/24/business/china-cryptocurrency-bitcoin.html?
searchResultPosition=11

[Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously,
she was a senior reporter at Quartz, covering law and politics.
She studied journalism at Boston University, religion at Columbia University, and law at the City University
of New York.]

[Amy Qin is an international correspondent for The New York Times covering the intersection of culture,
politics and society in China. She has covered China's global soft power campaign, the emergence of its
vast censorship apparatus and the many ways in which Chinese citizens thrive, cope and struggle in a
landscape of deepening political control.]

U.S. banking regulators have held interagency “crypto sprints” in recent months to lay out pathways for regulation.
Financial regulators have met under the Treasury Department’s guidance to prepare a report this fall on the risks of a
particular kind of cryptocurrency, known as a stablecoin, that has exploded in use in recent months.

In some smaller nations, like El Salvador, which recently adopted Bitcoin as legal tender, the open, global financial
network based on cryptocurrencies is being promoted as a tool to foster financial inclusion and economic growth.

The Bahamas created a digital “sand dollar” — a version of the Bahamian dollar
that is the most advanced central bank digital currency in the world — and has
welcomed crypto businesses interested in relocating. This week, the crypto
derivatives exchange FTX, a large crypto platform, announced that it would move
from Hong Kong to the Bahamas, which has “one of the world’s few comprehensive
crypto regulatory structures,” the exchange’s founder, Sam Bankman-Fried, said in
a statement explaining the move.

Binance, the world’s biggest cryptocurrency exchange, was founded by Changpeng

Zhao in China in 2017, but moved to Japan within months, after Chinese officials
cracked down on crypto trading platforms. After other moves, including at one point saying it had no
official headquarters, Binance announced in July that it would create regional headquarters in every area of the world
where it operated.

“Most people don’t understand how much work we do to follow the rules,” said Mr. Zhao, who is now based in
Singapore.

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Ineffective
Regulating crypto won’t work to deter criminals, but will harm innovation and
legal use
Deschapell 21—Dischapell, Ariel. (2021). Why Regulating Bitcoin Won’t Work. Retrieved 2 October
2021, from https://www.coindesk.com/markets/2014/02/25/why-regulating-bitcoin-wont-work/

[Ariel Deschapell is content manager for blockchain real estate startup Ubitquity, and a recent Henry Hazlitt
fellow at the Foundation for Economic Education. Follow Ariel:  @NotASithLord. Ariel is an investor in
bitcoin, and has stock in Ubitquity (See: Editorial Policy).]

In recent months, bitcoin has skyrocketed in usage and popular attention. With all this increased exposure and rapidly
growing business activity, the public sector was bound to get involved sooner or later.

Governments everywhere are increasingly taking steps to regulate bitcoin and other

cryptocurrencies, but these responses have been anything but uniform. And, while some countries are taking a
‘hands-off’ approach, these are the exceptions to the general trend.

Canada and New York are both poised to enact new regulatory measures, Russia has been the first developed country
to ban bitcoin outright, and China came pretty close to doing so back in December. While countries may be far apart in
the way they tackle the issues raised by bitcoin, their fears are the same.

When Russian authorities announced that bitcoin was illegal, they outlined “laundering of money obtained through
crime, as well as financing terrorism” as chief concerns, and that sentiment is echoed across many regulatory agencies.

This uniting aspiration to prevent money laundering highlights the inability of various
governments to grasp how bitcoin really works, and how far out of their control it is.

Perhaps this ignorance was inevitable, due to the currency’s sudden and meteoric rise, which pressured governments to
do something without giving them time to fully understand what was happening.

Indeed, even now it still seems impossible to predict how bitcoin and its surrounding services will continue to develop.

Nonetheless, this widespread failure to understand the fundamental principles behind the Bitcoin protocol and its
implications can lead governments to make decisions that will ultimately harm economic development, while
impacting criminal activity very little, if at all. One of the glaringly obvious flaws in the patriotic
actions of countries like Russia to protect their citizens from terrorists and money
laundering is the simple fact they cannot enforce it.

Bitcoin and all other cryptocurrencies are completely decentralized peer-to-peer systems.
There is no central server to shut down, no one to catch and, crucially, no one prosecute –
no one that will cause the currencies to crumble, at least.

Put simply, no government on the planet can stop me from downloading a wallet or mining
client and connecting to the bitcoin network. Just ask the United States and other developed countries,
who have been trying rather unsuccessfully to crack down on illegal P2P torrents over the last decade.

Hence, anyone who is intent on using bitcoin to launder funds overseas, for which it is most
apt, can still purchase them from individual dealers, trusted miners, or even purchase their
own mining hardware to turn that dirty money into crypto-coins.

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Indeed, it’s easy enough to imagine how the bitcoin industry would develop in a
permanently illegal context to serve the needs of already illegal organizations, potentially
allowing them much more flexibility in both storing and moving funds around the world.

This is what scares governments, but the point they seem to miss, is that for better or worse,
they can’t do anything about it.

Take Silk Road, the infamous anonymous online marketplace that allowed individuals to purchase just about anything
with bitcoin.

Many other such markets exist in the Deep Web, and while there will occasionally be a highly publicised bust, criminal
activity still continues on a massive basis. Outlawing bitcoin will not affect these already illegal operations in the
slightest.

Increasingly, we are seeing the development of ever more organized Deep Web markets,
exchanges, and even private currency systems, as criminals move away from bitcoin to
other, more anonymous digital currencies. Guess where most of this development seems to
be occurring?

If you guessed the only developed country to fully outlaw all cryptocurrencies, Russia, you
would be correct.

Another proposed regulatory measure is a ban on ‘tumblers’ – tools that allow users to confuse the source of their
bitcoins. This idea, discussed in New York’s regulatory hearings, further highlights the unwillingness for traditional
regulatory institutions to admit that they have no authority over the matter.

New
Tumblers, like illegal markets and exchanges, can be hosted anonymously from any server in the world.
York’s Department of Financial Services may as well ban the sun from setting, as they’d
probably have more leverage there.

The individuals most affected by government regulation are the ones already engaged
in legal business activities and ventures – that is, those paving the way for an innovative and
competitive financial future, and one with a global reach.

Outlawing bitcoin simply restricts legitimate business and drives the criminals
underground, depriving the private sector at large of benefits of the
cryptocurrency. Without government approval, legal businesses and users can’t take
advantage of bitcoin’s speed, low costs, flexibility, and anonymity.

So, . We can already see in Canada that even naive talk of cracking down on bitcoin has dealt a crushing blow to
developing startups.

Even in areas where bitcoin isn’t considered illegal, any regulatory hurdles will inevitably hamper innovation.

Countries with a more laid back approach are the ones likely to benefit most from a bitcoin-
fuelled financial revolution – even if it’s still too early to tell what exactly that is going to
look like.

This extrapolates to seemingly conventional regulations, such as requiring exchanges and other services to collect the
personal information of customers.
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Inequality
Regulation would help big crypto companies while harming smaller players, thus
formalizing a winners-and-losers system no different from our wildly unequal fiat-
based system
Volpicelli 21—Volpicelli, Brian. (2021). New Regulation Could Cause a Split in the Crypto Community.
Retrieved 2 October 2021, from https://www.wired.com/story/regulation-split-crypto-community/#

Cryptocurrency is usually, and lazily, described as a Wild West, but as a matter of fact the established businesses
operating in the sector—from big mining enterprises to Wall Street–listed giants such as Coinbase—tend to crave
regulation to define the boundaries of what is acceptable and what might get them into trouble. “Sophisticated
players in this space welcome intelligent regulation. It provides clarity and predictability for
large operations,” Brammer says. “It provides a set of rules of the road that allow large,
publicly traded companies to make sure that they're doing everything they can to be as
viable and as profitable as possible going forward.”

But where does that leave the smaller, less established, less corporate players? Bitcoin—an asset
owned and lionized by billionaires such as Mark Cuban and Elon Musk—has been growing since 2009 into an industry
that carries heft and brand recognition. (Even Ted Cruz is waxing lyrical about it).

The much-contested amendment approved by the White House would have saved bitcoin
while throwing much of crypto under the bus. Granted, when that plan emerged, the crypto lobby—or, at
least, crypto-Twitter—rose as one against it. Jerry Brito, executive director of cryptocurrency trade group Coin Center
thundered against the Senate’s attempt to pick “winners and losers,” while venture capitalist and crypto-ideologue
Balaji Srinivasan said that the amendment would eventually open the door to a full-blown bitcoin ban. But it is
worth wondering whether, in the long run, a rift might open between a Big Crypto
clamoring for clear regulation to achieve peace of mind and the smaller actors of the
cryptocurrency community, who might be less well equipped to meet the requirements that
regulation would impose.
Patrick Murck, a legal expert and an affiliate with the Berkman Klein Center at Harvard University, says that the
infrastructure bill could go down in history as the moment in which a wedge was started to be driven between those
two constituencies. “I think there is potentially a schism between the everyday community
around crypto coming into conflict with an institutionalized form of crypto,” he says. “I
don't think that there's such a desire within either camp, but you can see how increasing
scrutiny and regulation could lead to that. The question is, does that put the community in conflict with the
players that are being institutionalized?”

One segment of the cryptocurrency industry that seems to be in for a walloping is the so-called decentralized finance,
or DeFi, sector. That is a budding ecosystem in which financial services such as loans, savings, or trading are provided
by blockchain-based programs as opposed to companies. The requirements stemming from the infrastructure bill's
"broker" definition— onerous enough for bitcoin miners and exchanges—would be just as daunting when applied to
DeFi, says Lex Sokolin, global fintech cohead at blockchain firm Consensys.
"People that are engaged in decentralized finance—like the lenders and the traders and so on—of whom there are about
2 million and are all over the world and are in large part regular people—,” he says, “those people would be considered
the equivalent of the Nasdaq," squashed by an excessive compliance burden. Even if that language were amended at a
later stage, the Securities and Exchange Commission has already made it clear that it is poised to crack down on DeFi,
which it regards as a high-risk sector, as the agency's chair emphasized in a letter to influential democratic senator
Elizabeth Warren.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Over-regulation
Congress will regulate crypto to death
Thysse 21—Thysse, W. (9/2021). New US Crypto Regulation Far more Invasive than we Thought.
Retrieved 2 October 2021, from https://decentralizedlegalsystem.com/us-crypto-currency-regulation/

[Wesley started his career in finance. He worked as a project controller at Multi Real Estate, a large
developer of iconic shopping malls in Europe. He later settled in Dubai where, as a corporate service
provider, he assisted entrepreneurs and high-net-worth individuals with international tax planning and legal
structuring. Wesley holds a Msc. degree in Management from the University of Greenwich, London.]

US Congress intends to regulate crypto on a level far deeper

than currently understood―They will:

 Designate Bitcoin, Ether, and their hard-forks as commodities and regulate their transactions accordingly;
 Create legal uncertainty for all other crypto projects and ICOs by allowing them to be labeled as securities;
 Ban the use of (unauthorized) stablecoins;
 Introduce prison sentences for the use of mixers and privacy coins;
 Rebrand smart-contracts that take longer than 24 hours to deliver as futures contracts and regulate them
accordingly;
 Re-define legal tender and change the way money is created by the Federal Reserve; and authorize the
issuing of a digital USD of which all transactions are recorded;
 Introduce foreign regulations into US law for all virtual asset service providers in the US (and with US
clients).

In short: Congress wants to bring crypto-currencies under full oversight and control.

These new regulations introduce massive regulatory burdens on existing projects, ban and
criminalize current normal activities, restrain innovation and free enterprise, and even
introduce a transparent central bank digital digital currency that redefines money as we
know it!
According to United States representative Don Beyer, congress should incorporate “digital assets into existing financial
regulatory structures.”1) As you will see, they intend to do just that.

And it will change the way things are done for crypto forever…

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Recent changes to cryptocurrency laws are unreasonable and unworkable

Onge 21—Onge, P. (8/2021). Infrastructure Bill’s “Unworkable” Cryptocurrency Surveillance Mandate
Must Be Amended. Retrieved 2 October 2021, from https://www.heritage.org/markets-and-
finance/commentary/infrastructure-bills-unworkable-cryptocurrency-surveillance-mandate

[Peter St Onge is a research fellow in  economic policy  at The Heritage Foundation. He holds a Ph.D. in
Economics from George Mason University, and a B.A. in Economics and Political Science from McGill
University.]

Sen. Rob Portman, R-Ohio, introduced a measure into the infrastructure bill last week

intended to increase financial surveillance that could backfire and simply drive an entire
industry offshore while putting the personal data of tens of millions of Americans at risk.
The measure was intended to assuage Republican concerns about the bill’s mammoth price tag, but it may ultimately
raise very little, if any, money, since it merely reiterates existing reporting obligations for brokers while potentially
mandating new requirements for entities that cannot possibly comply. This led Sen. Pat Toomey, R-Pa., to characterize
the measure as “unworkable.”

In fact, the
measure is not a new tax on cryptocurrency. Rather, it is a surveillance mandate
intended to target brokers who are already required to report customer transactions.

Unfortunately, as written, the

mandate could also include entire swathes of the cryptocurrency
industry such as miners, who do not hold custody of money or view customer details any
more than your electric company does when you buy something on Amazon.com. These
firms cannot comply—it is technologically impossible.
As the Blockchain Association put it, “What Congress is considering with this measure is not a new tax on the
cryptocurrency industry. Instead, it puts new reporting requirements on individual players in the industry who have no
way to comply.”

The Electronic Frontier Foundation added, “The mandate to collect names, addresses, and

transactions of customers means almost every company even tangentially related to
cryptocurrency may suddenly be forced to surveil their users.”
The two main components to Portman’s cryptocurrency provisions are, first, requiring that all digital asset payments
above $10,000 be reported to the IRS. The second component, however, is the problem. It would expand the definition
of a broker to anybody “effectuating transfers of digital assets,” who would all be required to fill out a type of 1099
form with the name, address, and amount transferred.

The problem is this definition would likely include miners who, like the electric company, help maintain
cryptocurrency networks but have no idea who uses it. It could include regular users who save their tokens in return for
largely software-generated payments, whether via “staking” to maintain the network or by using the Lightning
Network to relay purchases.

It could even include software developers, which would be like requiring the manufacturer of your pocket calculator to
fill out a Form 1099 when you use the calculator to buy a mortgage. None of these entities can possibly provide such
information, because they have no way of getting it. This means the current language may mandate what is literally
impossible.

There is no question that cryptocurrencies should be taxed like any other assets. And their
growing use, now by tens of millions of Americans, underlines the role of broker
compliance. This measure, however, simply repeats existing broker mandates while adding
the impossible.
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Self-regulation
The crypto industry can regulate itself—exchanges are closer to the tech,
problems and solutions, and a free market can protect customers
Howell 21—Bronwyn Howwell. Regulation threatens Korea’s cryptocurrency exchange market. (2021).
Retrieved 2 October 2021, from https://www.aei.org/technology-and-innovation/regulation-threatens-koreas-
cryptocurrency-exchange-market/

[Bronwyn Howell is a nonresident senior fellow at the American Enterprise Institute, where she focuses on
the regulation, development, and deployment of new technologies and the use of technology in the health
sector.  Dr. Howell has a PhD in economics and public policy, an MBA, and a BA in operations research, all
from Victoria University of Wellington in New Zealand.]

In an embryonic market like cryptocurrency exchanges, industry self-regulation might be

an optimal first option. Those aware of the intricacies are best placed to draw up codes of
conduct and form alliances of exchanges adhering to specific codes. “Good” alliances are
best placed to monitor the ethical behavior of their members and use refusal to admit or
ejection from the group as checks against less-ethical traders.

As consumers will prefer better codes or alliances over poorer ones, competition will lead
the best codes to not just survive but prevail, as the worst ones fail from lack of customers.
These arrangements prevailed in the governance of embryonic share markets at their outset and subsequently amongst
banks. They have also been evident in the crypto space, with the Japanese Virtual Currency Exchange Association, the
Korea Blockchain Association formed in 2018 by cryptocurrency exchanges, and CryptoUK.

The Defi industry has reduced the leverage that customers can borrow at—thus
reducing the risks they can take
Livni & Lipton 21—Ephrat Livni and Eric Lipton. Leaders in Cryptocurrency Industry Move to Curb the
Highest-Risk Trades. (2021). Retrieved 2 October 2021, from
https://www.nytimes.com/2021/07/25/us/politics/cryptocurrency-ftx-high-risk-trade.html?
searchResultPosition=16

Two of the world’s most popular cryptocurrency exchanges announced on Sunday that they

would curb a type of high-risk trading that has been blamed in part for sharp fluctuations
in the value of Bitcoin and the casino-like atmosphere on such platforms globally.

The first move came from the exchange, FTX, which said it would reduce the size of the bets
investors can make by lowering the amount of leverage it offers to 20 times from 101 times.
Leverage multiplies the traders’ chance for not only profit, but also loss.
“We’re going to be the ones to take the first step here,” Sam Bankman-Fried, 29, the billionaire founder of the
platform, which operates from Hong Kong, said on Twitter on Sunday. “Today, we’re removing high leverage from
FTX. The greatest allowable will be 20x.”

About 14 hours later, Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, echoed
the move by FTX, announcing that his company had already started to limit leverage to 20 times for new users and it
would soon expand this limit to other existing clients.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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The crypto industry is innovating to increase consumer protections to prevent

hacking attacks
Kominers 21—Regulating the unregulated cryptocurrency market. (2021). Retrieved 3 October 2021,
from https://news.harvard.edu/gazette/story/2021/09/regulating-the-unregulated-cryptocurrency-market/

[Interviewer: Christina Pazzanese is a staff writer at The Harvard Gazette, covering national and world
affairs. Her work has also appeared in The Washington Post, The Boston Globe, and the late Boston
Phoenix.]

[Interviewee: Scott Duke Kominers  ’09, A.M. ’10, Ph.D. ’11, is the MBA Class of 1960

Associate Professor of Business Administration at Harvard Business School  and a faculty affiliate of
Harvard’s Department of Economics  and the  Harvard Center of Mathematical Sciences and Applications.
He advises crypto businesses and projects, including Facebook’s digital wallet and payment system, and
holds crypto currency and other crypto assets. Interview has been edited for clarity and length.]

GAZETTE: The SEC chairman called this an asset class “rife with fraud, scams, and abuse.” Is this industry operating
in a rule-free, “Wild West” atmosphere, as he suggested?

KOMINERS: I haven’t read the full Gensler remarks, so I can’t comment explicitly on his overall take, but I can
comment on some of the individual elements you mention. It’s clear that this space needs much more
consumer protection, and we’re starting to see that. Right now, if a hacker gains access to
your crypto wallet, they can drain it and you may have no recourse. But the newer waves of
wallet technologies and crypto exchanges are thinking hard about all the things consumers
expect out of banking products and equities trading accounts. They’re trying to create more
security and protections at the consumer-interface level. And then, of course, you also need regulation
to prevent financial crime and scams, just like we have in other parts of the financial-services industry.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Simplification
The US federal government should reduce and simplify regulation
Etherington 21—Coinbase to propose a federal regulatory framework for crypto to US officials within the
next month (2021). Retrieved 3 October 2021, from https://techcrunch.com/2021/09/22/coinbase-to-
propose-a-federal-regulatory-framework-for-crypto-to-u-s-officials-within-the-next-month/

[Darrell Etherington is a News Editor at TechCrunch. He’s spent most of his career at TC, with a couple of
breaks to gain experience in industry-leading technology companies including Apple and Shopify.]

Cryptocurrency trading platform Coinbase wants to help guide any emerging regulation on exchanges like itself, for
obvious reasons, and in an interview with TechCrunch Editor-in-Chief Matthew Panzarino at TechCrunch Disrupt 2021
on Tuesday, Coinbase CEO and founder Brian Armstrong revealed it’s preparing a draft regulatory framework for
consideration by federal lawmakers which it aims to distribute sometime within the next month.

“Coinbase wants to be an advisor and a helpful advocate for how the U.S. can can create that sensible regulation,”
Armstrong said in the interview. “In fact, there’s a proposal that we’re putting out at the end of this month, or maybe
early next month, that is our proposed regulatory framework.”

Regulators typically seek industry feedback when forming new rules, particularly in industries where the pace of
technological advancements mean that progress in the market has far outpaced the development of new, and
amendment of existing, regulation. Armstrong said that he has in fact been asked multiple times for such a proposal.

“When I go to DC, I’ve met with a number of people in government, and they typically will ask us ‘Well, do you have
a draft, do you have a proposal of something we could try to shop around about how this could be regulated
federally?’,” he said. “Because right now, Coinbase has, you know, 50 different state regulators for
money transmission licenses, 50 for lending licenses, you know, FINCEN, and SEC, and
CFTC, and IRS and Treasury and OFAC.”

Armstrong clearly would prefer if there were an overarching federal framework that would
alleviate the burden of dealing with independent state-by-state rules and agencies. But he
also did seem aware that any proposal they put forward will definitely be just a single piece
of a larger puzzle, which will include input from other industry entities working in crypto
as well as guidance from existing related regulation. “We have a proposal that we actually want to put
out there that could help maybe create at least one idea about how to move forward,” he said. “But this is going to
require input from a lot of people, and that willingness [on the part of lawmakers] to kind of engage with private
industry and learn about what the opportunity is here.”

Coinbase recently clashed with the SEC after teasing the launch of a ‘Lend’ product that would allow its users to stake
their crypto holdings in exchange for a return in the form of yearly interest. The SEC threatened to sue over the product
since it signaled that this would represent a security, and be regulated as such, and Coinbase quietly walked back its
plans to debut the product for now shortly after making public the SEC’s threat and articulating its lack of
comprehension about the potential regulatory backlash.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
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Status Quo Adequate

Crypto isn’t special, and its purposes aren’t different than traditional banking.
Crypto must not be regulated as a special entity or treated differently—existing
regulations should be applied to cryptocurrency.
Hanke & Sekeke 21—Steve H. Hanke and Matt Sekeke (2021). Retrieved 3 October 2021, from
https://www.cato.org/commentary/cryptos-legal-white-space-fact-or-fiction

[Steve H. Hanke is a professor of applied economics and founder and codirector of the Institute for Applied
Economics, Global Health, and the Study of Business Enterprise at the Johns Hopkins University in
Baltimore. He is director of the Troubled Currencies Project at the Cato Institute and a  senior fellow at
Cato’s  Center for Monetary and Financial Alternatives.

Matt Sekerke is a Fellow at Johns Hopkins Institute for Applied Economic]

The recent spat between Coinbase and the Securities and Exchange Commission has brought into public view the
cryptocurrency industry’s attitude toward regulation, as well as the disjointedness of the efforts to regulate crypto
within the United States. Consider some details. Coinbase, perhaps the most prominent player in the crypto world, has
underscored its willingness to play ball with regulators. SEC chairman Gary Gensler has decried the lack of protections
in the world of crypto, and his agency has declared Coinbase’s proposed interest‐paying Lend product to be
a security so that the SEC might assert its jurisdiction.

Indeed, all parties appear to want regulation for crypto — but an apparent impasse remains because of the mistaken
belief that crypto exists in a legal white space. In truth, cryptocurrency is already subject to the
existing laws and regulations of finance; it would be an affront to the rule of law for
regulators to behave otherwise. It is time for all involved to give up the pretense that crypto
transactions require substantively new rules.
In multiple venues, the field of crypto produces objects that are meant to be used like money; it also intermediates
interest‐bearing transactions between borrowers and lenders, holds objects out as financial‐investment opportunities,
and organizes the trading of such objects on exchange‐like platforms. We tend to call such media money, loans,
deposits, and securities, and the entities who deal in them banks, broker‐dealers, and exchanges. Significant regulatory
expectations attach to all these entities, and for good reason: Huge sums are at stake. Whether the current body of
financial regulation is optimally written and administered is a separate issue.

It is time to give up the pretense that crypto transactions require substantively new rules.
Though they walk and quack like ducks, players in the crypto field insist that they are birds of a different feather. We
have heard this story before: Uber is neither a taxi dispatcher nor an employer, and Airbnb is not a hotelier, though both
may appear as such to the untrained eye. Indeed, fast‐moving technology companies wield the letter of the law against
the spirit of the laws with a skill and alacrity that would make Montesquieu’s head explode. This dismissiveness of the
law reaches its apotheosis in the world of crypto. When Coinbase asks for clear regulations, it is asking
for new, special regulations that apply only to its not‐loans of not‐money, and trades of not‐
securities on its not‐exchange.

For nearly a decade, U.S. regulators have been unable to slice through this Gordian knot of obfuscation, forcing them to
play catch‐up with the accelerating ecosystem of crypto. Why? In broad terms, the SEC has jurisdiction over securities
and exchanges, the Commodity Futures Trading Commission covers commodities and commodity‐trading venues, and
the Federal Reserve and the U.S. Treasury’s Office of the Comptroller of the Currency are responsible for issues
concerning money and banking. Before any of these agencies can address what crypto does, they must assert what
crypto is. By focusing its ire on the SEC’s decision to categorize Lend as a security, Coinbase stokes these interminable
turf battles that often open the doors of regulatory arbitrage, while shifting attention away from the matter at hand:
Coinbase’s users will lend at interest without a clear understanding of their rights in the event that neither the borrower
nor Coinbase can guarantee repayment of their principal.

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Efforts to sort out overlapping and competing jurisdictions in the U.S. financial‐regulatory structure have distracted
lawmakers and regulators from careful thinking about two more essential questions. First, what interest does the United
States have in fostering a parallel financial system that competes directly with its successfully regulated dollar‐based
system? And second, why would regulators “reward” the costly and generally sincere compliance efforts of players in
the regulated financial system by ratifying the practices of an industry purpose‐built to evade those requirements?
In recent years, a high regard for the rule of law has slipped — even in some conservative and libertarian circles — on
the belief that free markets and freedom of choice alone can produce prosperity. But scholars in the classical‐liberal
canon are clear that free markets depend on the rule of law, as well as the human institutions that stand behind it.
Nobelist Friedrich Hayek, for example, observed that liberty does not exist as such; rather, it must be constituted by
law. Furthermore, laws that support liberty and competitive markets are, among other things,
universal in application and enforced equally.
With its disdain for the law and human institutions, crypto strikes at the heart of the market order. In a world in which
the only governing institutions are coded protocols with ambiguous authorship, there would be truly no backstop for
market exchange, whether in the law or in the more diffuse and human “bourgeois virtues.”

Crypto proponents will say that this is precisely the point, and that their system is needed because the human
institutions of the government and the financial system cannot be trusted. Whatever the merits of such a view in the
abstract might be, such reasoning should fall on the deaf ears within government. The government
itself must be completely invested in the continued existence and improvement of its
institutions. Government must, therefore, force crypto into the existing rubrics of its laws
and regulations, based on the functions for which crypto is manifestly used. Anything less
would grant the crypto industry an enormous privilege in the true sense of the word and
make a sham of the rule of law.
Likewise, “rewarding” the heavily regulated financial system by granting a lightly regulated parallel system its
imprimatur would be a performative contradiction for the government. If a protection is necessary, then
everyone must comply. Substance must prevail over form.
In U.S. tax law, the substance‐over‐form doctrine established in Gregory v. Helvering holds that when a “transaction
upon its face lies outside the plain intent of the statute,” to respect the form of the transaction over its obvious economic
substance “would be to exalt artifice above reality and to deprive the statutory provision in question of all serious
purpose.”

Will the United States deprive its own laws of all serious purpose by allowing the crypto
industry to assert that its activities do not entail the production and lending of money and
trading of financial instruments? Will we make fools of everyone who follows the law in
order to build a new financial system around a lawless form of money and property?

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Value
Regulation decreases cryptocurrency value
Shanaev et al. 20—Shanaev, S., Sharma, S., Ghimire, B., & Shuraeva, A. (2020). Taming the
blockchain beast? Regulatory implications for the cryptocurrency Market. Research In International Business
And Finance, 51, 101080. doi: 10.1016/j.ribaf.2019.101080

[Savva Shanaev is a researcher in Economics and Finance and PhD candidate at Northumbria University]

This paper uses a unique dataset of 120 regulatory events from five classes to test the
relevance of the regulatory framework for cryptocurrency value. Time-series market-wide
estimates and panel estimates for 300 individual coins and tokens show statistically and
economically significant impact of anti-money laundering and issuance regulation. Tighter
regulation and more active role of government decrease cryptocurrency prices, evidencing that
potentially lower risks and wider adoption commonly attributed to the establishment of the regulatory framework do
not compensate for respective efficiency and consumer utility losses. The market is generally efficient in reflecting
regulatory information in cryptocurrency prices.

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Con Blocks

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and/or assets will produce more benefits than harms.

AT: Capital Flight

There is little evidence of capital flight with cryptocurrency regulations
Feinstein & Werbach 21—Feinstein, B., & Werbach, K. (2021). The Impact of Cryptocurrency
Regulation on Trading Markets. Journal Of Financial Regulation, 7(1), 48-99. doi: 10.1093/jfr/fjab003

[Brian D. Feinstein examines the structure and function of regulatory agencies and the interplay between
these agencies and other institutions. Feinstein received a J.D. from Harvard Law School and a Ph.D. in
government from Harvard University. He also earned a B.A. in economics and political science from Brown
University.

Kevin Werbach is an American academic, businessman and author. In 2002, he founded the Supernova
Group, a technology analysis and consulting firm. Since 2004, Werbach is an Associate Professor of Legal
Studies and Business Ethics at The Wharton School, University of Pennsylvania.]

The meteoric growth of global cryptocurrency markets presents novel challenges to regulators. Some
policymakers and scholars warn that regulation will cause trading activity to cross borders
into less-regulated jurisdictions—or even smother a promising new financial asset class.
Others believe regulatory actions will stimulate activity by providing clarity to market participants. Standing behind
this disagreement is a debate about the desirability of either outcome. Some believe that governments should promote
development of the cryptocurrency sector within their countries, while others view cryptocurrencies as conduits of
illegality and fraud that should be restricted through strict regulation or even outright bans. Yet these debates have, to
date, been conducted almost entirely without data concerning the effects of regulation on market activity. As a
corrective, in this article we assembled original data on cryptocurrency regulations worldwide
and used them to empirically examine movement in trading activity at a number of
exchanges following key regulatory announcements. We found that a wide variety of models
yielded almost entirely null results. From the creation of bespoke licensing regimes to
targeted anti-money-laundering and anti-fraud enforcement actions, as well as many other
categories of government activities, we found no systemic evidence that regulatory measures
cause traders to flee, or enter into, the affected jurisdictions. These findings at last provide an
empirical basis for regulatory decisions concerning cryptocurrency trading. Among other things, they call into
question that capital flight or chilling effects should be a first-order concern.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

Even if there was evidence of capital flight, there’s a reason crypto miners aren’t
welcome in China: the electricity needed for mining creates massive CO2
emissions and is devastating to environments
Shih 21—Shih, Gary. Bitcoin miners exit China, beat a path to the U.S. as crypto climate shifts (2021).
Retrieved 2 October 2021, from https://www.washingtonpost.com/world/asia_pacific/bitcoin-mining-china-
crypto-america/2021/06/17/0a39c3a8-c903-11eb-8708-64991f2acf28_story.html

[Gerry Shih is the India Bureau Chief for the Washington Post, covering India and neighboring countries.]

He said he is building about 50 shipping containers to house his computers to plop onto an oil field in West Texas, and
is breaking ground on a 33-megawatt site in Newfoundland and Labrador, Canada.

“Right now in China, everybody’s scared. The question is not whether you pull out, but
immediately or gradually,” the miner said. But he added that there were regulatory
uncertainties in the West, too.

“U.S. local communities don’t necessarily like bitcoin farms,” he said. “We need to be aware of that,
and the environmental policy risks because the Biden administration might take a harsher
stance on bitcoin.”
Other Chinese miners have fewer compunctions about seeking new frontiers.

Jiang ticked off a number of disadvantages to expanding in the United States: too many
“environmentalists who worry about wildlife and the birds,” he said, and too much “White
liberal idiocy” preoccupied with climate change — the science of which he has doubted. U.S.
electricity was six times more expensive than in China, he estimated, and he would have to pay relatively high wages to
I.T. staff to keep his computers purring.

Even so, Jiang said he was considering two sites in Texas and Tennessee. It seemed less risky than other places,
including the Middle East, where he had operations shut down by authorities, or Russia, where his colleagues’
expensive computers have been seized by corrupt police.

And right now, everywhere seemed a safer bet than China, where regulators can be mercurial and unforgiving.
“A change in government policy that suddenly forces out all miners — that would never happen in America,” Jiang
said. “It’s a capitalist system.”

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: China
The US shouldn’t follow China’s lead—it should do exactly the opposite
Sigalos 21—MacKenzie Sigalos (9/2021). U.S. should do ‘exactly opposite’ of China on crypto, says
Andreessen Horowit’z Katie Haun. https://www.cnbc.com/2021/09/29/us-should-do-exact-opposite-of-china-
on-crypto-says-katie-haun.html

[MacKenzie Sigalos is a technology reporter based out of CNBC’s San Francisco bureau, with a focus on
cybersecurity, financial technology, and gaming.]

In considering how to regulate the crypto industry, the U.S. should look to China for what
not to do, said Katie Haun, a partner at Andreessen Horowitz.

“This is an opportunity for the United States, because we should be doing the exact opposite
in my mind in this realm of what China is doing,” [said] Haun, a former federal prosecutor
who now helps manage Andreessen Horowitz’s crypto investments, said on Wednesday at CNBC’s Delivering Alpha
conference.

Earlier this year, China created its own digital currency, the digital yuan, which is being controlled by the People’s
Bank of China. The currency aims to replace some of the cash in circulation. China has run real-world trials for the
digital currency in a number of cities including Shenzhen, Chengdu and Suzhou.

Bitcoin and cryptocurrencies, by design, are not controlled by a central authority like a
bank or government, and crypto enthusiasts generally say that’s the only way they can be
trusted.
Haun predicted that China will “tie trade, tie loans, tie other assistance to the use of essentially their stablecoin,” which
is a type of digital currency that’s often backed by a currency. Some have linked the timing of the digital yuan launch
to Beijing’s renewed efforts to crack down on the wider crypto market.

Haun said the U.S. has, so far, taken the right approach on central bank digital currencies, or CBDCs.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: Crime
i. Losses from crypto crime fell 57% last year
Chavez-Dreyfuss 21—Chavez-Dreyfuss, G. (2021). Cryptocurrency crime drops in 2020 but 'DeFi'
breaches rise, study finds. Retrieved 5 October 2021, from https://www.reuters.com/article/crypto-currency-
crime-int/cryptocurrency-crime-drops-in-2020-but-defi-breaches-rise-study-finds-idUSKBN29X1YO

Losses from cryptocurrency theft, hacks, and fraud fell 57% last year to $1.9 billion, as market
participants boosted security systems, but crime in the ‘decentralized finance’ space continued to grow, a
report from crypto intelligence company CipherTrace showed.

Criminals got away with a record $4.5 billion in 2019 in the crypto market.

Fraud was the dominant cryptocurrency crime in 2020, followed by theft, and ransomware. Half of all thefts, or about
$129 million, were hacks tied to decentralized finance (DeFi), which are transactions on platforms that facilitate
lending outside of banks.

Cryptocurrencies have attracted renewed scrutiny and interest as institutional investors have piled into digital assets,
particularly bitcoin, propelling the latter to a record high of $42,000 this month.

“Thefts from hacks against centralized exchanges continue to decrease as these financial institutions mature and adopt
stronger security measures,” Dave Jevans, CipherTrace’s chief executive officer, said in an interview.
“Regulation and enforcement are restricting centralized fraud schemes, which are pushing criminals to exploit
decentralized finance services,” he added.

The total number of loans on DeFi platforms was nearly $25 billion, as of late Wednesday, data from industry site DeFi
Pulse showed, up more than 500% from roughly $4 billion in August last year.
DeFi sites run on open infrastructure, with algorithms that set rates in real time based on supply and demand.
“DeFi platforms enjoy many exemptions from traditional regulatory enforcement regimes that centralized exchanges,
money service businesses and banks face,” said Jevans.

ii. Scare Tactics: Claims about crypto being used for crime are scare
tactics to increase regulation rather than reality
Pethokoukis 21—Pethokoukis, James. (2021). How can government mess upy innovation and
technological progress? Like this.https://www.aei.org/technology-and-innovation/how-can-government-
mess-up-innovation-and-technological-progress-like-this/

[James Pethokoukis is a columnist and an economic policy analyst, is the Dewitt Wallace Fellow at the
American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast,
“Political Economy with James Pethokoukis.” He is also a columnist for The Week and an official contributor
to CNBC.]

Crypto & Bitcoin: I think safety would probably be the biggest issue here, in the sense that policymakers
fear a
world of unregulated crypto and decentralized blockchain applications is a world in which
the “bad guys” will be able to use those technologies to harm the public in some fashion.
We’ve heard this all before, of course, but (going all the way back to the Clipper Chip wars) you can
always bank on law enforcement officials resorting to Chicken Little claims about terrorists
and child predators thriving in a world of unregulated crypto.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

iii.Financial Crimes: very few financial crimes are committed with

cryptocurrencies
Wilmoth 18—Josiah Wilmoth. Bitcoin has ‘No Visible Impact on Financial Crime: Hong Kong Government
(2018). Retrieved 3 October 2021, from https://www.yahoo.com/news/bitcoin-visible-impact-financial-crime-
132552865.html

[Josiah Wilmoth is the US Editor at CCN.com, where he focuses on equities and the housing market. He
has written over 2,000 articles since first joining CCN in 2014.]

Bitcoin skeptics often deride cryptocurrency for its supposed associations with criminal networks and illicit activities.
However, a new report from the Hong Kong government says that rising consumer interest in
bitcoin has not correlated with a “visible impact” on the risk of financial crimes.
Officials made this claim in the government’s annual money laundering and Terrorist Financing (ML/TF) risk
assessment report, which said that bitcoin and other “virtual commodities” (VCs) currently present a “medium-low”
risk to the government’s ability to prevent and prosecute financial crimes.

“Although there is inherent ML/TF vulnerability related to VCs, there does not seem to be any visible impact affecting
the overall risk in Hong Kong so far. The risk of VCs is assessed as medium-low,” the multi-agency task force wrote in
the report. “The current legal and regulatory provisions relating to ML, TF, fraud and other crimes are wide enough to
catch offences involving the use of any general property, including VCs.”

The report is the latest data point in a growing body of research that suggests bitcoin’s
associations with criminal activity have been far overblown and that the rate of illicit
transactions is decreasing over time as cryptocurrencies become more common in
mainstream financial markets. –

Recently, the office of the Quebec government’s chief scientist published a fact-check on
cryptocurrencies in which they found that bitcoin is used in very few crimes.

Indeed, the US dollar remains the currency that is most widely-used among criminal
networks.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: Infrastructure Bill

The cryptocurrency stipulation was cut from the 2021 infrastructure bill draft
Dossett 21—Julian Dossett (15 September 2021). Bitcoin, Venmo, Robinhood see new nationwide rules: What to
know. Retrieved 3 October 2021, from https://www.cnet.com/personal-finance/bitcoin-venmo-robinhood-may-see-
new-nationwide-rules-what-to-know/

[Julian Dossett is a writer based in New Mexico. His work has appeared at Bankrate, TV Guide,
Reviews.com, The Simple Dollar, Cord Cutters News, Coverage.com, Blockchain Beach, and MSN News.]

In August, the Senate passed an infrastructure spending package funding the improvement of old
roads and bridges, expanding high-speed internet access and taking measures to address clean drinking water and
climate change. But an earlier draft included some significant provisions concerning the
legislation of cryptocurrency. Of particular note was a proposition that would have required so-called "crypto
brokers" to report tax data to the IRS, just like brokers of other assets such as stocks, bonds and commodities. 

Ultimately, the cryptocurrency provision was cut from the spending package due to
disagreements about the definition of who could reasonably be categorized as a crypto
"broker." Lawmakers could not come to a consensus about whether or not to include crypto miners, transaction
validators and software developers.

As a modest collection of existing laws, as well as current proposals in Congress (including H.R. 1628 and H.R. 3723),
continue to coalesce into an informal legal framework, the crypto exchanges -- most prominently Coinbase -- have
emerged as a focal point of Washington's interest. 

SEC Chair Gary Gensler has become one of the more outspoken voices advocating government regulation of
cryptocurrency. Before Biden tapped Gensler for his current role, Gensler was a professor at MIT, where he taught a
course on cryptocurrency. 

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: NFTs
There seems to be little grounds to regulate NFTs – for Financial Crimes Laws, US
Sanctions Law, or even under state law
Jones Day Law Firm 21—Key U.S. Legal Considerations for NFTs. (2021). Retrieved 3 October
2021, from https://www.jonesday.com/en/insights/2021/04/nfts-key-us-legal-considerations-for-an-emerging-
asset-class

[Jones Day is an American international law firm. As of 2018, it was the fifth largest law firm in the U.S. and
the 13th highest grossing law firm in the world.]

Are NFTs Subject to Federal Anti-Money Laundering Laws and What About U.S. Sanctions?

The Financial Crimes Enforcement Network ("FinCEN") is the bureau of the U.S. Department of
Treasury with regulatory authority over the financial system to combat money laundering under the Bank Secrecy Act
("BSA") and other related laws. To date, FinCEN has not issued guidance specific to NFTs , but it has
published guidance generally about how the BSA and FinCEN regulations relate to virtual currencies that could apply
to NFTs. One question is whether FinCEN regards NFTs to be "value that substitutes for
currency." If NFTs are considered substitutes for currency, then FinCEN could consider
NFTs to be subject to the BSA and FinCEN regulations. Since many NFTs are more like
digital representations of ownership in unique assets than value that substitutes for
currency, however, it seems that many NFTs available on the market should not be subject
to FinCEN's oversight. Depending on the facts and circumstances, certain other business activities related to the
transfer, sale, and custody of NFTs may implicate FinCEN regulations.

The Office of Foreign Assets Controls ("OFAC") administers most U.S. sanctions programs.
Similar to FinCEN, OFAC has not provided guidance specific to NFTs, but it has explained
that U.S. sanctions apply to digital transactions and currencies in ways similar to traditional
activities. Further, OFAC has pursued enforcement actions involving cryptocurrency transactions and blockchain
technology. The possibility of persons subject to U.S. sanctions participating or benefitting, directly or indirectly, from
activities involving NFTs present the primary avenue of risk exposure; moreover, NFTs present circumstances that
OFAC has identified in other scenarios as presenting heightened risks for potential violations. While details will vary
with different structures, the potential lack of transparency and decentralization associated with the use of blockchain
technologies can present difficulties in preventing sanctioned persons from participation. Further, NFTs may present
many of the same issues that OFAC recently identified as associated with artwork, including a high degree of
anonymity, the use of intermediaries, concealability, and subjective valuation.  Given these considerations, those
participating in NFT transactions should pay heed to sanctions considerations.

Are NFTs Subject to State Laws Governing Virtual Currency or Money Transmission?

Given the superficial similarities between NFTs and some virtual currencies, it is reasonable to consider whether NFTs
are subject to state laws governing virtual currency or money transmission. To date, no state regulator with oversight of
virtual currency or money transmission has issued guidance directly about NFTs. Depending on how a particular state
defines money transmission, it is possible that some may try to claim regulatory oversight over certain NFTs or certain
business activities related to NFTs. 

In addition, some
states have passed laws addressing the operation of companies engaged in
virtual currency businesses. New York and Louisiana are two examples. Each state has a list of activities it
deems under its laws to constitute virtual currency business activities, which can include for example: exchanging,
transferring, controlling, administering, or issuing virtual currency. Both states require companies that engage in such
activities to obtain a license or charter and post surety bonds or fund an account for the protection of customers.
Depending on the characteristics of the NFT, it is possible that either state could try to apply its virtual currency law to
the NFT marketplace. However, many current NFTs available on the market should not be
subject to those statutes.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: SEC
The SEC is corrupt—officials who judged against the cryptocurrency XRP made
money from competitor cryptocurrencies
Mkrtchyan 21 (how tf do u pronounce this)—Karen Mkrtchyan. Former SEC officials under investigation for
corruption in Ripple lawsuit. (2021). Retrieved 3 October 2021, from https://coinchapter.com/former-sec-
officials-under-investigation-for-corruption-in-ripple-lawsuit/

[Yerevan-based Editor and writer focusing on topics about politics and international relations. Having
completed his Bachelors and Masters degrees from Delhi's Jawaharlal Nehru University, he currently works
as a Projects Coordinator at Indo-Armenian Friendship NGO and the Indian Cultural Centre, Armenia.]

According to Empower oversight, two high-ranking officers worked against Ripple in what seems
to be a case of corruption. 

William Hinman, the former SEC Director, Division of Corporation Finance, is one of the accused.
Hinman allegedly took money from Simpson Thacher law firm, his former employer, to act
against Ripple.

Hinman’s former employer Simpson Thacher is part of the Enterprise Ethereum Alliance. As a
member of the EEA, the law firm works to popularise the enterprise use of Ethereum.

As an SEC official, Henman was instrumental in declaring that ETH was not a security,
spiking Ethereum’s market value. 
Meanwhile, o further help Ethereum, Hinman made sure that the SEC went after Ethereum’s competition Ripple. In a
dramatic lawsuit against the company, the SEC sued to prove that the XRP token was a security. 
According to Empower Oversight:

“Later, the SEC sued one of Ethereum’s competitors, Ripple, declaring its cryptocurrency, XRP, was
security. Shortly thereafter, XRP’s value plummeted 25%. After Hinman left the SEC in December of 2020,
he returned to Simpson Thacher as a partner. The leader of the SEC division that brought the XRP lawsuit,
Marc Berger, similarly left the SEC for Simpson Thacher.”

Another high-ranking SEC officer, the former Chairman Jay Clayton, faces similar

allegations. 
According to Empowerment oversight, Clayton had used his powers to declare that Bitcoin wasn’t a security.

His honesty was also suspected when he joined One River Asset Management after his tenure. The organization is a
cryptocurrency hedge fund focusing on Bitcoin and Etherum.

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

Both

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Resolved: Increased United States federal regulation of cryptocurrency transactions
and/or assets will produce more benefits than harms.

AT: CBDC Good

The US should strive for a more open currency market, not try to centralize and
hyper-control cryptocurrencies
Disparte 21—Dante Disparte. A Central Bank Digital Currency Would Be Bad for the US. (2021).
Retrieved 3 October 2021, from https://www.coindesk.com/policy/2021/05/17/a-central-bank-digital-
currency-would-be-bad-for-the-us/

[Dante Disparte is the Chief Strategy Officer and Head of Global Policy for Circle, a leading digital financial
services firm building the most trusted treasury and payments infrastructure for the internet, including the
fastest growing dollar digital currency, USDC.]

There is a frenzied, if inaccessible, debate taking place among think tanks, policy experts
and media outlets signaling that the U.S. Federal Reserve should launch a centrally issued
digital twin of the U.S. dollar.  
Among the many arguments for why this is necessary is that the U.S. is losing ground to China, whose government has
a national blockchain strategy, including a real-world prototype central bank digital currency (CBDC). While these
arguments are valid, they miss the larger point, which is that by today’s hyper-competitive digital
currency and blockchain standards, the U.S. may not be a laggard at all, but rather is
already winning the race for the future of money and payments.
Dante Alighieri Disparte is the Chief Strategy Officer and Head of Global Policy at Circle, a digital financial services
firm and architect of USDC, a dollar-pegged digital currency. He is also a member of the Federal Emergency
Management Agency’s National Advisory Council, Founder and Chairman of Risk Cooperative and serves on the
World Economic Forum’s Digital Currency Governance Consortium.

In trying to “out-China China” on these important issues, we miss that the future of money
and payments should be about enhancing domestic financial optionality. Upgrading
payment and banking systems,, enhancing interoperability and open banking standards,
requires a major upgrade in the technology stack that supports value transfer and more open financial services
innovation.

That was exemplified by the original version of the COVID-19 relief bill, the Cares Act, which called for the creation
of a digital dollar to expedite domestic stimulus payments while trusted, privately-issued digital currencies were
already in circulation along with a growing and interoperable blockchain-based payment system.

Legacy financial rails, such as ACH, EFT and other interbank transfer networks, have not had an update in 50 years.
Blockchain-based payment systems represent the completion of a lot of unfinished work in the financial services value
chain, which has left more than 1.7 billion people around the world as unbanked, rather than a source of disruption or
circumvention. China’s fintech and mobile money titans collectively process over $67 trillion a year. That alone does
not constitute a threat to the U.S. dollar as a global reserve currency. The vibrant crypto asset industry that calls the
U.S. home has been advocating for a more open global payment system for years.  

A true internet of value would advance important first principles, such as privacy, trust, democratization of assets and
prosperity, rather than clinging to dated and largely ineffective financial rules, such as the Bank Secrecy Act. 
The bottom rung of economic mobility is access to low-cost payments. In a world where individuals rely on nationally
issued identity, billions of people are on the financial sidelines – a source of global risk and destabilization. We need
new forms of digital financial services plus internet-native digital identification and
authentication, which preserve privacy, but provide assurances that financial crime
compliance standards are being adhered to and modernized.

A $2 trillion industry was born largely on public digital commons, rather than on risk-
prone and costly technology implied by a government administered CBDC.

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