The Blog

11/30/21: Crypto & DeFi Regulation Update

capitol building

As we near the end of 2021, there has been a lot of chatter related to DeFi and cryptoasset regulation. In light of this, and ahead of Onramp Invest CEO Tyrone Ross’ participation in the SEC Investor Advisory Committee this Thursday, we want to help you get up to speed.

This article will cover updates stemming from four major parties:

  1. The White House
  2. SEC
  3. CFTC
  4. OCC / FDIC

The White House

The recent $1T infrastructure bill signed into law by President Biden includes provisions around cryptoasset trading taxation that investors and advisors should become familiar with.

Changes implemented as a result of the recent infrastructure bill:

  • Any cryptoasset transactions worth over $10,000 are required to be reported to the IRS
  • Crypto exchanges will be required to notify the IRS of all transactions, making it harder for investors to hide gains

According to Senator Pat Toomey, “This legislation imposes a badly flawed, and in some cases unworkable, cryptocurrency tax reporting mandate that threatens future technological innovation.”

We couldn’t agree more, Pat.

It is one thing for banks and exchanges to have to abide by these rules. No one is arguing that.  Not even within the crypto community.  But not so much for individuals.

Let’s say you are selling an NFT worth more than $10,000. You would need the buyer’s full name, birth date, address, Social Security number, and occupation.  If you do not report all that information, you just now committed a felony.  And if the person who sent you the NFT isn’t willing to provide that info, they too have committed a felony.

What happens if you are airdropped a token worth over $10,000?  How do you collect the necessary information when you do not even know who sent it to you, or if you had not asked for it in the first place?

In many instances, it is quite literally impossible to adhere to this law as worded. The law is poorly drafted by individuals who clearly do not understand the technology nor the ramifications of what they drafted and did not take the time to consult anyone with the appropriate knowledge base.

There is an obvious need for additional clarity. Those drafting legislation in an attempt to regulate crypto and DeFi markets must be well armed with an intimate understanding of how the markets and its participants operate in order to provide guidance.

Fortunately, Senate Finance Committee Chairman Ron Wyden (OR-D) and Senator Cynthia Lummis (WY-R) have plans to introduce a new bill today that would reverse some of the cryptocurrency provisions in the recently-passed bipartisan infrastructure package.



SEC Commissioner Caroline Crenshaw recently published an article encouraging participants within DeFi to proactively cooperate with regulators, specifically when it comes to risk disclosures. Those who fail to comply may face additional enforcement actions from regulators

The recent article, in which Crenshaw outlines the current DeFi regulatory landscape, outlines two major hurdles the DeFi community needs to address:

  1. Many Investments Share important Attributes
  2. Unregulated Markets Suffer From Structural Limitations

“Many DeFi offerings and products closely resemble products and functions in the traditional financial marketplace… while the underlying technology is sometimes unfamiliar, these digital products and activities have close analogs within the SEC’s jurisdiction.”

Crenshaw notes that the speed of development within the space is impressive and that some projects show potential for, “scalable increased efficiencies in transaction speed, cost, and customization.” However, at its core DeFi is about investing, and should be regulated as such.

According to Crenshaw, DeFi’s current, “buyer beware” approach isn’t sufficient foundation on which to reconfigure the financial system. Many regulation-related items should transcend TradFi: Setting conduct expectations, mandating internal controls, and disclosure requirements to mitigate information asymmetry, to name a few.

Without a common set of expectations and a governing body to enforce said expectations, markets will trend towards corruption, misinformation, and fraud that erodes investor sentiment.


CFTC acting chair Rostin Behnam has publicly stated that he believes at least 60% of cryptoassets are commodities. He is pushing for a broader mandate to regulate the crypto market. He believes that his agency should oversee crypto and be the primary regulator of crypto markets.


The OCC has gotten in on the action, encouraging banks to comply with regulators before offering any crypto-related services.

The OCC, aligning with other prominent officials, authored a recently released report that recommended stablecoin issuers should be regulated like banks. Hsu, the Acting Comptroller of the OCC, is worried that stablecoins could be too much innovation.

So, what does this all mean? Regulators are encouraging participants within the crypto ecosystem to willingly cooperate on developing a robust framework for market conduct, compliance, taxation, reporting standards, & more.

To ensure unconstrained innovation within the space in years to come, it’s crucial that the regulators tasked with providing a blueprint for the future are truly knowledgeable about crypto and DeFi markets, their participants, the technology powering it.

There is a LOT going on when it comes to crypto and DeFi regulation, thus a lot of confusion. It can feel hard to keep up. Luckily, ORA has you covered. Continue educating before you allocate with us at