A bill that could significantly impact the crypto, blockchain, and decentralized finance (DeFi) sectors has advanced in Illinois, according to a recent article in NewsBTC. House Bill 3479, sponsored by Representative Mark L. Walker, includes a proposed law called the Digital Assets Regulation Act (DARA), which seeks to regulate digital asset business activity in Illinois, including crypto, blockchain, DeFi, and NFT sectors.
The bill grants the state more power to investigate unapproved digital asset transactions, and arrest those who go against the guidelines. DARA has received mostly negative reactions from the crypto industry, but has gained some support for clarifying the legal status of various crypto-related transactions. When regulators only tell firms when they have screwed up—without specifying exact policies—it keep firms guessing and doesn’t necessarily help them as they look to avoid similar mistakes in the future.
The regulation of crypto has become a contentious issue, with debates around how it should be regulated, if at all. While some argue that crypto should remain unregulated to preserve its decentralized nature and ensure that government intervention does not stifle innovation, others believe that regulation is necessary to protect investors and prevent financial crime.
Illinois’ proposed bill is an example of the latter, seeking to regulate digital asset activity to ensure that clients’ interests are protected while crypto businesses remain compliant with laid-down rules.
“In trying to establish a regulatory regime for crypto, Illinois is attempting to offer companies in the space some clarity,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “There are, however, several issues that are concerning. First, by creating a very tight window for submitting an application and gaining approval if the bill is passed, Illinois is making it very difficult for companies to comply.”
“In the case of New York’s Bitlicense, which the Illinois bill seems to emulate, the process for application and approval is very long,” he said. “Will Illinois be able to handle applications or will companies simply have to abandon working in the state? Additionally, the language for what is covered is so broad that it could affect future development in the space as digital assets begin to encompass things like gaming. Will gaming companies be required to seek approval?”
“Regulatory clarity is good, but it needs to be balanced with providing flexibility, especially in a quickly evolving space.”
Regulation of crypto has become a global issue, with countries taking different approaches. China and India, for example, have banned or discussed banning cryptocurrencies, while on the other end, El Salvador has adopted Bitcoin as its national currency. The U.S. is somewhere in the middle—regulators have been increasingly scrutinizing crypto, and federal regulators are developing a regulatory scheme for the industry. In the absence of comprehensive federal regulation, states like Illinois are stepping in with their own ideas.
As the regulation of crypto continues to evolve globally, it’s essential to strike a balance that protects investors and ensures innovation can continue. This is especially the case if crypto is to move from a nice product to one that is widely adopted in the economy.