US Election Countdown Highlights Crypto Policy Stagnation Despite Institutional Normalization

• US Treasury is in need of stronger crypto oversight amid an election-year legislative deadlock.
• Warren’s AML bill sparks opposition as industry warns of stifling US innovation.
• Crypto strides forward with ETFs and institutional investments despite uncertainty.

Crypto has gained recognition among institutions, but the US faces a critical juncture in its policy framework ahead of the 2024 elections.

US citizens will cast their votes in November 2024. But, the cryptocurrency sector is caught between rapid institutional adoption and a growing legislative impasse.

A Treasury official called  for expanded regulatory powers to combat crypto-related crimes, while Senator Elizabeth Warren’s proposed Digital Asset Anti-Money Laundering Act of 2023 (DAAMLA) has stirred industry opposition. This legislative inertia reflects a broader pattern of policy stagnation in Congress, threatening the US competitive edge in the digital asset market.

Calls for Enhanced Regulatory Powers

Brian Nelson, Treasury’s Under Secretary for Terrorism and Financial Intelligence, highlighted the struggle to contain illicit activities with the use of digital assets. Nelson emphasized the need for updated tools and resources to address these challenges effectively in written testimony from February 14. 

Previously, Treasury Secretary Janet L. Yellen also outlined concerns about digital assets before the Committee on Financial Services of the U.S. House of Representatives.

With calls for legislative action, the $2T crypto market has no bipartisan bills that have seen the light of day. 

Warren’s AML Bill Faces Backlash

Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act (DAAMLA) has become a focal point of contention. Some community members are criticizing it for potentially stifling innovation and driving the crypto industry offshore. 

The bill’s requirements on Bitcoin miners and blockchain validators have raised concerns about the future of the US as a leader in digital asset technology. The Blockchain Association, among others, warns  that DAAMLA could undermine US competitiveness, threaten jobs, and fail to deter the foreign illicit actors it targets.

Industry and Legislative Crossroads 

While the legislative landscape remains uncertain, the crypto industry saw a significant milestone in January with the debut of Bitcoin ETF. 

Institutions have been expanding into the space since then. Fidelity Investments Canada integrated Bitcoin into its asset allocation funds. These developments, alongside the Republican presidential nominee’s foray into non-fungible tokens (NFTs), signal mainstream acceptance. 

Yet, the progress contrasts with the regulatory gridlock as the election approaches. A comprehensive dialogue involving all stakeholders seems crucial to developing a regulatory framework that balances innovation.