Public Policy – Global DCA

Public Policy

Guiding Principles

We are often asked how the Global DCA is able to bring together and achieve agreement amongst such a broad-based and diverse membership base when crafting standards, designing educational offerings and – in particular – when developing policy positions. The answer is that we start from a point of ‘Guiding Principles’ which help bring diverse viewpoints around the table to synthesize an organizational perspective. Our five ‘Guiding Principles’ are outlined below:

The Global DCA believes strongly in the concept of balanced regulation – regulation which balances the need for innovation in the industry with the need to protect consumers, stakeholders and the general public.

We believe that blockchain and digital assets are a transformative technology that will fundamentally shift the global financial sector. Digital assets are not just another fintech or technology that we can view through the narrow scope of financial sector regulation. But given their transformative nature and the evolution of this space must be viewed through the following four lenses:

  • National Security

  • Economic Growth / Job Creation

  • Financial Sector Evolution / Global Positioning in the Digital Era

  • Sustainability – Environmental as well as financial inclusion, access to finance and other social outcomes

By taking a holistic approach to understanding digital assets, we believe national jurisdictions may most appropriately devise policies, structure legal and regulatory frameworks and properly position themselves in the global digital economy.

So what is the correct legal and regulatory approach to digital assets? This will vary by jurisdiction, but generally, the Global DCA believes in a right-sized approach to government regulation complemented by a credible and robust system of self-regulation. This combination of regulation + self-regulation will allow greater overall regulatory coverage for the industry and individual jurisdictions and will help to strike the balance between the need for innovation and consumer protection.

This industry, more than any in recent memory is best suited to self-regulation as:

  • RAPID EVOLUTION – We are dealing with a rapidly evolving industry which requires a swift and nimble approach to the regulation.
  • HIGHLY TECHNICAL – This industry is highly technical and requires significant expertise that is even difficult to find / maintain / retain in the private sector – let alone the public sector.

  • NEED FOR PROXIMITY – Further, the combination of rapid evolution and required expertise to effectively regulate necessitates a high degree of proximity – such as that found in self-regulatory regimes – to the digital asset industry. Given the swiftness with which innovation is being undertaken in this space – an expert removed from the industry’s knowledge could easily become obsolete in a short period of time.

  • GLOBAL – Finally, the construct of the digital asset industry very naturally transcends borders. It is truly borderless and global. Given the need for cross-border, global harmonization and engagement to regulate – there is a need for a self-regulatory entity which can more easily follow the flow of transactions.

As such, a self-regulatory approach makes the most sense in terms of providing effective and efficient regulatory coverage for this industry.

Global DCA Policy Positions

Leveraging our ‘Guiding Principles,’ the Global DCA undertakes member and partner association roundtable seminars, engages with stakeholders and considers the public interest in crafting its policy positions. Global DCA policy positions, comment letters, statements and responses are provided below:

Defining Global DCA and Self-Regulation

To enhance consumer and investor protection and facilitate innovation and industry development, Global DCA has launched an SRO Framework Project which will further explore and refine the organization’s nature and advancement of self-regulation. This exhaustive research, industry dialogue, and broader consultation is a necessary component of building governance institutions as governance institutions must not only reflect financial sector realities, but the broader economic, political, and social context of a given jurisdiction. Please click below to read the full response. CLICK HERE for the Full Response

Global DCA Response to Executive Order 14067 – The Benefits of Digital Asset Development

The Global Digital Asset & Cryptocurrency Association (“GDCA”) welcomes the opportunity to comment on Executive Order 14067 (the “EO”) that examines ways to ensure responsible development of the digital asset industry.1 GDCA applauds the process undertaken by the Treasury to solicit public engagement on this important topic, and welcomes the opportunity to be part of the ongoing dialogue. Given the breadth of the topics covered in the request for comment, GDCA will focus primarily on the role the Treasury Department can play in guiding the modernization of AML regulations. Please click below to read the full response. CLICK HERE for the Full Response

Beyond Terra – An Assessment of Stablecoin Benefits and Policy

The collapse of the Terra/Luna blockchain (now known as Terra Classic) is a watershed moment for the digital assets industry and warrants level-headed reflection about the future of “stablecoin” products. Given the uptick in negative sentiment, this paper dispels harmful myths about the many promising varieties of stablecoins while acknowledging the specific weaknesses of the Terra/Luna protocol and its related UST “algorithmic” stablecoin. To respond to increased scrutiny around stablecoins in the wake of UST’s collapse, we recommend policies such as Self-Regulatory Organizations (SROs), Model Risk Management (MRM) discipline, and Sarbanes-Oxley-style certification for those stablecoins secured with high-quality reserve assets. We believe that this will improve information availability and transparency and therefore reduce, if not completely eliminate, the fear of any “run“ or “contagion“ on stablecoin assets. Please click below to read the full response. CLICK HERE for the Full Response

Global DCA Response – SEC Release: Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer

Global DCA writes to comment upon the Proposing Release because of its significance to the digital asset industry and the public. In the Proposing Release, the Securities and Exchange Commission (the “Commission”) proposes to redefine the term “dealer” in Exchange Act Section 3(a)(5) by the addition of proposed new Exchange Act Rule 3a5-4. The main focus of our letter is on the application of the expanded definition of “dealer” to entities that trade digital assets that are within the meaning of the term “securities.” In our view, the application of the dealer registration requirement to such entities is unworkable, and the Commission has completely underestimated the costs of such registration. In fact, the Commission has ignored the reality that its own conduct has made dealer registration impossible for entities that trade digital assets. While we will focus on the implications of mandatory registration for traders in digital assets, we observe, as a starting matter, that we believe that the Commission’s proposed expansion of the term “dealer” is inconsistent with the historical understanding of the term as used in the statute. (more…)

Global DCA Response – Response to “Money and Payments: The U.S. Dollar in the Age of Digital Transformation”

Global DCA writes to highlight our significant views and considerations about certain key aspects of the CBDC proposal given its possible influence on the digital asset industry, financial markets, and the general public. The GDCA welcomes the new exploration and public discussion of a CBDC by the Board. The GDCA strongly supports the Board’s continued study and exploration of CBDCs. We think that a successful implementation of a U.S. CBDC could have a huge consequence on the various aspects of our society, from strengthening the Fed’s ability to implement policy, to increasing access to financial services, to speeding and modernizing financial transactions. In the long term, a U.S. CBDC, or appropriate support of private digital currency development, is essential to maintaining U.S. dollar dominance and to preserving America’s role on the global stage. (more…)