The United States crypto industry sits at a regulatory crossroad — the country has everything to gain, but is at risk of losing access to an entire industry that could revolutionize both finance and technology as the world knows it.
Crypto companies, and those with crypto on their balance sheets alike, have been operating in a regulatory gray area for some time. While these companies are looking to comply with industry standards, they are restricted by unclear and opaque rules, paired with harsh retaliation from state and federal regulators that intimidates early adopters and stifles American innovation as a result. The situation is simple: the U.S. has the opportunity to harbor the blockchain industry and set the global precedent for governance, but the country must act quickly before losing out to another region of the world.
Drawing the line
It's easy to cross a line if we can't see where that line is.
Regulatory uncertainty makes it difficult for treasuries to hold digital assets — too much room for interpretation and no prior case studies prevent any kind of standardization for businesses operating with large volumes of digital assets on their books. This is only solved through transparent accounting rules and regulatory guidelines. To date, the U.S. has been slow to provide this type of clarity to the market, thus making compliance nearly impossible.
The U.S. Securities and Exchange Commission is regulating by enforcement, levying fines and charges on crypto companies from different subsets of the industry. This retaliatory approach is insufficient, divisive, counterintuitive, and indicative of an administration that is either unwilling or unable to provide long-term support for a burgeoning industry. The lack of clarity surrounding regulation, in turn, results in a lack of sufficient understanding of how to remain compliant. Strict, reactive discipline punishes those who dare to evolve and adopt this new technology rather than actual bad actors.
The U.S. has long been the standard bearer for growth and innovation in all industries. However, the country has failed to foster an environment for learning and developing businesses in the digital asset industry. As a result, companies like Coinbase and Gemini have already begun establishing business operations in countries outside the U.S. who are willing to collaborate and adapt.
We cannot continue to let other countries court the nascent crypto industry while remaining vague in our guidelines or watching entirely from the sidelines. Europe has already begun the process of establishing itself as a crypto innovation hub with the adoption of Markets in Crypto-Assets in the EU. MiCA is closing gaps in existing legislation by establishing a comprehensive and harmonized set of rules for crypto across EU markets. The United Arab Emirates has also been incredibly welcoming, drawing in big industry names such as Binance and Kraken by granting them each their Minimal Viable Product license and Financial Services Permission license respectively.
The United States should be forthright in adopting digital assets and blockchain technology and it is imperative that American leadership paves the path forward in adopting and nurturing this new industry.
Taking the next step
There is, however, a light at the end of the tunnel and the situation is not yet dire for the United States. Standard-setting bodies are removing the pain points of digital asset adoption with a new course of action. The Internal Revenue Service and the Financial Accounting Standards Board have started the process of deploying rules and regulations for American companies to follow for digital asset reporting, making meaningful progress in record time. The path forward is clear implementation of rules and greater transparency for digital asset organizations to operate here in the U.S.
For the industry to progress within the U.S., it needs to remove the smoke and mirrors that are preventing the plunge into digital asset adoption and open a new market for American business leaders. New FASB guidance on the horizon will promote clarity and alignment between accounting outcomes and economic realities, allowing companies to be properly evaluated while increasing transparency and the industry's comfort to exist and forge ahead.
Transparent accounting is a cornerstone to mass adoption. It's up to accountants to lead the way in legitimizing a maturing industry. If other regulatory bodies can follow in the footsteps of the IRS and FASB, a new era of flourishing American innovation can occur.
The U.S. has untapped potential to be the most diverse and supported market in crypto and the broader digital assets ecosystem, but only if the U.S. assists in promoting American leadership by establishing a clear regulatory framework. This is a high stakes game, and companies need to build on a solid foundation. It's up to the leaders of this country to make sure the foundation is built here in the U.S. rather than abroad.
