Washington seeks to expand crypto oversight

The cryptocurrency explosion forced Washington to adapt federal financial rules to a growing and rapidly changing industry.

Americans have invested billions of dollars in cryptocurrencies and a wide range of blockchain-based financial platforms over the past year as the pandemic unleashes an investment boom. As the crypto market has grown over the past decade, a resurgence of interest in the space and the rapid rise of decentralized financial networks have attracted new attention from regulators and investors alike. legislators.

Democrats, Republicans, and industry advocates widely agree that the current patchwork of state and federal rules covering cryptocurrencies and tech is no longer achievable. The Securities and Exchange Commission, Commodity Futures Trading Commission (CFTC), Department of the Treasury, and state money transfer licensors all share overlapping jurisdictions over parts of the crypto industry, this which often leaves companies uncertain of their regulatory obligations.

Ron Hammond, director of government relations for the Blockchain Association, said two forces have brought about a regulatory awakening in Washington: a growing understanding among crypto critics that the industry is here to stay, and the industry accepting the need. to work with Washington.

“You can’t get around DC,” Hammond said. “DC is a huge – in most cases – a hurdle and in some cases an opportunity, and it’s important to educate members of Congress and get the narrative right. Otherwise, you can end up on the wrong side of things.

With the notable exception of the former President TrumpDonald Trump’s Networks halfway – here’s how and why MORE, most Republicans see promise and opportunity in the growing cryptocurrency space. Several GOP lawmakers have likened the emerging industry to the internet and warned of stifling rules that could prevent crypto from expanding financial access and independence.

Some Democrats see cryptocurrency as nothing more than another place of speculation and money laundering, and the intense climate impact of cryptocurrency mining and general political fatigue from Big Tech has also posed barriers to industry acceptance.

Despite this, the growing importance of cryptocurrencies has forced critics to focus on how to make them more secure and more transparent.

Digital tokens straddle the lines between different financial products defined by some of the earliest attempts to regulate markets, and many of the platforms used to trade and store them are not subject to federal oversight. The resulting overlap forced the SEC and other agencies to regulate through enforcement while seeking more authority.

“What I think is really complicated is that you are talking about old laws and old case law that just never considered that,” said Michael Liftik, partner at Quinn Emanuel and head of practice. law firm SEC enforcement.

“What the industry and, quite frankly, the lawyers who work on it are calling for is clarity. You can’t have innovative, creative, cutting-edge technology that has the power to transform so much how finance and other industries are conducted with the regulatory uncertainty we experience today. “

The SEC and CFTC have primarily focused on crypto firms and offerings that clearly violate general investor protection and anti-fraud laws. Each agency, sometimes in collaboration, cracked down on deceptive or fraudulent crypto offerings, platforms that dodged registration requirements, and old-fashioned scams such as Ponzi schemes restarted with new technology.

President of the SEC Gary GenslerGary GenslerWashington wonders how to extend crypto oversight to SEC’s Roisman to step down in January SEC fines JPMorgan $ 5 million MORE, who taught a blockchain technology course at the Massachusetts Institute of Technology, said the agency would consider ways to expand oversight and transparency requirements for crypto issuers and exchanges under its jurisdiction.

Democratic lawmakers and regulators on both sides have also expressed particular concerns about “stablecoins,” tokens tied to cash or other more secure assets held by the coin’s issuer.

The relative stability of stablecoins compared to highly volatile tokens has made them a popular medium for payments and loan products. Still, there are no specific transparency requirements for stablecoins, and many of their critics fear that the collapse of a popular stablecoin could cause greater market disruption if holders rush to. think of them as money or other more secure assets.

“If well designed and properly regulated, stablecoins could support faster, more efficient, and more inclusive payment options,” a group of White House officials and financial regulators wrote in a November report. on stable coins.

“If stablecoin issuers do not honor a request to redeem a stablecoin, or if users lose confidence in a stablecoin issuer’s ability to honor such a request, executions on the Arrangement could occur. which could harm users and the financial system in general. ”they wrote.

Liftik said it will likely take legislation to make it clear which federal agencies – or perhaps a new one devoted exclusively to digital assets – are responsible for overseeing which parts of the cryptocurrency industry.

“Once you have the rules of the road, it’s easy to know who’s following them. You can catch the speeders, you can catch the people running red lights, and everyone knows those are the rules and so they may or may not respect them, “he said.