Cryptocurrency has become a global phenomenon with a market capitalization of almost $3 trillion at its peak in November 2021. The lack of central intermediaries and the use of public blockchains have led to challenges in adoption as transactions can be costlier and take longer to settle than traditional payment options. However, the growth of the crypto industry has created an entire ecosystem that supports cryptocurrencies, including custody services, exchanges, payment platforms, and decentralized finance platforms.
Currently, there is no overarching regulatory regime for crypto, and federal regulators have adapted existing regulations where cryptocurrency resembles traditional products and services in the financial sector. The novelty of cryptocurrencies’ design, the brisk pace of their ascent, and the general dynamic of the crypto industry have led to various policy questions that may be of interest to Congress.
One of the chief issues in the debate over regulation is how to balance the relative privacy crypto provides with its potential for use in illicit activity. Another issue is whether investor protections should be put in place in an industry that has been rife with scams and thefts. Some argue that inviting crypto further into the regulatory perimeter may enhance regulation and oversight, while others believe it may increase systemic risk and confer on the industry a sense of legitimacy it does not deserve.
Furthermore, the industry faces criticism for its large carbon footprint, which has led to concerns over its impact on the environment. Overall, the regulatory landscape for cryptocurrencies is still evolving, and policymakers will need to consider the potential benefits and risks associated with the industry before determining the appropriate level of regulation.