The cryptocurrency space is alive with new developments, like Decentralised Autonomous Organisations (or DAOs) and stablecoins; however, U.S. regulations are throwing a spanner in the works. DAOs utilise governance tokens that enable voting, and stablecoins maintain price stability for international transactions. Both are fundamentally important in reshaping our financial systems, and the U.S. government is trying to figure out the right approach to regulate them. Let’s take a closer look at the positioning of DAOs within U.S. jurisdiction, the consequences of stablecoin regulations on global transactions, and the possible outlook for these volatile elements of the cryptocurrency world.
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What Probably Matters the Most for Crypto
The emergence of stablecoins and DAOs is changing the frameworks of contemporary finance systems. Through governance tokens, communities can manage projects using DAOs without a central leader. USDC, a type of stable coin, improves the ease of liquidity by allowing fast and inexpensive cross-border transactions. Uncertainty regarding regulations in the United States could heavily influence the domestic and international workings of these tools. It is more than just crypto market regulations; it is about the direction of the future markets.
What Is New With DAOs And Governance Tokens
How Blockchain DAOs Function
A DAO, or decentralised autonomous organisation, is essentially an online cooperative society. Every member has the right to present suggestions and influence the decisions taken using governance tokens. These tokens perform several functions, like voting on proposed changes, funding new projects, or even changing rules, all with the help of blockchain technology. A remarkable case is The DAO, which collected $150 million in 2016 but suffered a security breach that cost it $50 million. This event heightened the focus on them from U.S. regulators.
DAOs and U.S. Regulations
DAOs face difficulties trying to find a balance within the U.S. regulatory structure. The Securities and Exchange Commission (SEC) claims that if a token provides benefits or grants voting privileges to the holder, it serves as a security, similar to stock. In 2017, the SEC labelled the tokens of the DAO as securities and claimed that they did not comply with registration rules. A few years later, the Commodity Futures and Trading Commission (CFTC) also jumped in, calling some of these tokens assets. This shifts focus towards DAOs like Uniswap, which are under the radar for alleged illegal trading activities. On the other hand, the IRS treats them as property, giving rise to the problem that with every decision taken, there are tax consequences.
The Complex Challenges Relating to DAOs
- Lack of Conventional Rules: DAOs face difficulties with standard operational processes like setting up a bank account because there is no set organisational hierarchy or structure.
- Who’s Responsible?
Without a clear leader, it is sometimes difficult for other parties, like regulators, for example, to know who to hold accountable when there are problems. - Exorbitant Costs: If tokens are deemed securities, then these DAOs must contend with highly centralised regulatory frameworks that directly contradict the foundational principles of decentralisation.
The Flow of Crypto Globally and Stablecoins
Stablecoins: Moving Money Worldwide
Stablecoins like USDC are very useful in international transactions as they are pegged to the US dollar. Their advantages include rapid processing times and significantly reduced costs—up to 80% lower than traditional methods—unlocking approximately $10 trillion in liquidity. With an estimated $210 billion circulating in stablecoins, mostly dollar-backed, they enable trading on DeFi platforms and assist individuals with weak banking systems.
How U.S. Rules Change Things
In 2025, the U.S. intends to implement primary policies around stablecoins, which include requiring dollar reserves and reporting frameworks. These policies could increase confidence in stablecoin mediums of exchange, but there are some drawbacks.
- Tough Rules: Stringent regulations might incentivise stablecoin creators to move to Singapore, where capital markets are less regulated, draining U.S. markets of potential investment.
- World Impact: Most stablecoins are issued in dollars, meaning the U.S. will have a global impact with these policies. If anything, heavy regulations are likely to dampen the volume of cross-border crypto transactions.
For example, stablecoins have reduced the cost of sending money to Kenya to only 2.02%. Services like PayPal are unable to compete. If US restrictions erode the functional efficiency of stablecoins, citizens will suffer the most.
How Other Countries Do It
- European Union: The MiCA (Markets in Crypto-Assets) regulation, which was enacted in 2024, includes all-encompassing rules for stablecoins such as the full reserves requirement and restrictions on big players. This has fostered innovation in crypto Europe.
- Singapore: Strong, relaxed regulations with a focus on protecting the consumer while maintaining general stability in the market are great for stablecoin development.
- U.S. Problem: The patchwork of regulations across states hinders the ability of crypto-related companies by providing too many compliance layers and limits innovation and growth.
Ways to Get Ahead
- Watch News – Tech: Track the SEC and CFTC, as their new regulations may come without any prior indication.
- Look Elsewhere: Consider DAOs or other projects in the European Union or Singapore to evade American regulatory scrutiny.
- Pick Cautious Stablecoins: Picking USDC is helpful, as it is a stablecoin whose issuers practice clear and transparent reserve policies.
- Pick Cautious Stablecoins: Picking USDC is helpful, as it is a stablecoin whose issuers practice clear and transparent reserve policies.
Wrap-Up: What’s Next for DAOs and Stablecoins
DAOs, along with stablecoins, are leading the charge towards innovation in cryptocurrency, but these technologies face stiff headwinds from US regulations. The DAOs’ interaction with the SEC and CFTC poses heavy scrutiny and makes it complex to run simple operations. On the other hand, stable cryptocurrency regulations could help encourage confidence in the market, but could be too constraining and limit crypto liquidity in other markets. The European Union and Singapore are much more active in providing regulations on cryptocurrency than the United States, and that’s a shame. No doubt, having regulations in place will add value to the industry, but the crypto community has a lot of hope that the crypto sector will flourish in the U.S
