FCA and IRS to Enforce New Regulation on Cryptocurrency Exchanges in The U.S.

The U.S.’s new administration is set on regulating the cryptocurrency markets, and they plan to do so by demanding exchanges keep customer funds separate from their own corporate budgets.

The White House has asked Congress for assistance in regard to how these companies operate; specifically when it comes down to allowing them access or restricting certain functions like purchasing goods or services with crypto through third-party providers.

The U.S. Department of Justice is demanding that cryptocurrency exchanges keep customer assets walled off in case they go bankrupt as Coinbase did recently with their disclosure about jamming up money from customers. This led federal officials into believing this type of custody rule should be imposed on all financial firms that deal primarily with digital currency markets so there isn’t any confusion when it comes down to customer protection.

Crypto experts say that federal officials will push in the coming weeks to have any change implemented into law. They are working hard on this new project and plan for it by putting their ideas into action within Congress, as well as using arguments from last year’s Working Group Report: “Companies hosting crypto wallets need close oversight.”

The administration thinks exchanges should still allow pooling assets among customers so they don’t have too much responsibility when managing trades internally rather than having every move posted publicly online as blockchain transactions do. Federal officials are also discussing if they should enforce anti-money laundering (AML) compliance for some digital assets.

Coinbase, the world’s largest cryptocurrency exchange by trading volume recently admitted in an SEC filing that “in event of bankruptcy”, their customers’ assets could be subject to civil proceedings and creditors. This includes any funds held as custody for users on behalf of other properties such as Bitcoin or Ethereum which are not covered under general unsecured debts owed from failed companies but rather belong specifically with those respective networks/coins themselves depending upon how they’re mined–ie: If someone extracts coins using specialized hardware then technically speaking these aren’t really ‘money’ anymore since there isn’t anyone left to back then who wasn’t party to the original coin creation.

Gary Gensler, chair of the SEC says that if you store your cryptocurrency in a digital wallet then it’s not actually yours. He worries about custody issues and bankruptcy courts because if something happens to this platform or whatever runs them then we’re stuck with them as an alternative partner until things calm down again.

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When a company takes your tokens, they can use them as they will. In fact, the exchanges are often trading against you and since customers lost billions in UST’s algorithmic stablecoin disaster (Luna), Gensler might gain some momentum with his investor protection advocacy.

“If previous hearings are any indication, then it’s likely that Congress will follow his lead and escalate their calls for greater oversight,” said Jaret Seiberg from Cowen Group. The troubles with TerraUSD and the drop in cryptocurrency valuations make this policy agenda more challenging under President Gensler despite him being a Republican.”

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