The United States has just enacted new rules that give the President the authority to limit or block access to digital assets, including crypto. This policy sparked concern among users and crypto communities around the world.
This regulation is considered controversial because it is considered to limit freedom and privacy in transactions using crypto. On the one hand, the US government argues that this step is necessary to maintain the stability of the financial system and prevent the misuse of crypto for illegal purposes such as money laundering or terrorism financing. However, on the other hand, crypto advocates consider this an overreach that threatens privacy and decentralization, the two main principles behind blockchain technology.
On June 6, Scott Johnsson, a well-known figure in the digital assets space, criticized the new law for its broad scope. The regulations allow the US President to block protocols or smart contracts deemed to be operated or provided by foreign sanctions violators by the Treasury Secretary.
According to Johnsson, this regulation can be interpreted as the power to ban users at an individual level, forcing them to use blockchain networks that comply with Know Your Customer (KYC) rules and permissioned blockchains.
One of the crucial points in this new regulation is the very broad definition of 'digital assets'. In this regulation, digital assets do not only refer to cryptocurrencies such as Bitcoin or Ethereum, but include all forms of value representation in digital format recorded on a decentralized ledger and secured with cryptography. This definition has the potential to cover various types of crypto assets, utility tokens, and other digital assets that may emerge in the future as technology develops.
With this broad scope, the US President is given the authority to limit or block transactions in digital assets between United States citizens and foreign entities identified as related to terrorist financing activities or other prohibited organizations. However, there are no further details regarding the mechanism and process for identifying the foreign entity in question.
This step is considered controversial because it could limit the freedom of movement and freedom of transactions in digital assets for US citizens. On the other hand, the government argues that these restrictions are necessary to maintain financial system stability and national security by preventing the misuse of digital assets for illegal activities such as terrorism financing or money laundering.
A number of analysts, including Johnsson, predict that this regulation has the potential to encourage the adoption of blockchain and cryptocurrencies that are centralized and subject to strict user identity verification (KYC) processes. They predict digital asset users could be forced to switch to blockchain networks that are centrally managed and have official operating permits from authorities.
Crypto advocates criticized this possibility as an attempt to erode the principles of decentralization and anonymity on which blockchain is based and tightly control the digital asset ecosystem. But on the other hand, the government can argue that this step is necessary to prevent the misuse of digital assets for illegal activities such as terrorism financing or money laundering by ensuring adequate controls and supervision.
Regardless of the pros and cons, this regulation has the potential to significantly change the digital asset industry landscape. Both developers and users may have to adapt to more stringent compliance demands and requirements if they wish to operate legally in the jurisdiction of the United States.
