The latest “crypto winter” following the collapse of Terra/Luna (R-MN), who discussed the challenges and pitfalls of crypto that may lay ahead because of the specter of federal regulation and intervention. Politicians are often reactive – responding to a problem, or at least a perception of a problem, with artificial solutions.
Referencing the recent deterioration of Terra/Luna, “I am worried about us rushing to solve a problem that too many people in Congress do not understand,” said Congressman Emmer. In particular, policymakers have been debating about how to define a high-quality liquid asset, but the risk is over-regulating it and stifling competition and creating new forms of fragility. “I am concerned that our government would define that as solely U.S. dollars,” Emmer said.
The solution, according to Emmer, is not more regulation, but rather a taxonomy by Congress that establishes definitions and creates a framework for building in web3. There is no debate that there is a role for federal policy—markets require a framework, or “rules of the game,” to function properly. But, “it needs to be a light touch regulatory environment,” Emmer said. “We cannot try and put crypto into a framework that is nearly 100 years old. Many regulators are trying to do just that by defining securities according to the three features of the “Howey test” established in 1933 as a result of the Supreme Court case.”
