The explosive growth of cryptocurrencies has triggered a debate over whether the government should regulate the industry. The Securities and Exchange Commission (SEC) Chair has said he favors regulation through his agency. Other lawmakers, including U.S. Senators Kirsten Gillibrand of New York and Cynthia Lummis of Wyoming, have also expressed their support for regulation through the SEC. However, the cryptocurrency industry has advocated for regulation by the smaller Commodity Futures Trading Commission (CFTC).
CFTC
The explosive growth of cryptocurrencies has ignited a debate in Washington, D.C., over who should regulate them. Some lawmakers, such as the SEC Chair, want to regulate them directly. Other senators, such as New York Democrat Kirsten Gillibrand, believe that the Commodity Futures Trading Commission, which is smaller, should handle the regulatory tasks. However, it’s not clear whether the two agencies can agree on how to regulate cryptocurrency.
There is some concern that lawmakers will fail to take action on cryptocurrency issues this year. It is unclear whether they will enact new legislation or not, especially with the midterm elections coming up. However, Republicans are favored to take control of the House in November and are likely to introduce new legislation on cryptocurrency in the coming months.
The EU is also debating cryptocurrency regulation. In April 2019, the country introduced draft legislation that will govern crypto assets. The central bank has said it will make a decision by 2022. This move is intended to keep up with the growing use of crypto assets. Meanwhile, the government of Mexico has announced plans to issue its own digital currency by 2024.
SEC
While the SEC has been aggressive in its enforcement of federal securities laws in the digital asset markets, it has now turned its attention to the cryptocurrency market and is considering rules for exchanges and lending products. The SEC has also been looking into the emergence of true DAOs (decentralized autonomous organizations). The SEC has been looking at lending pools and exchanges that facilitate trade of cryptocurrency, and it has focused its efforts on those entities.
Regulatory bodies around the world are trying to determine how to regulate the digital asset market. In the United States, the Securities and Exchange Commission (SEC) is the lead financial regulator. Other regulatory bodies are focusing their attention on cryptocurrency, including the Federal Reserve Board and the Treasury’s FinCEN. There are six primary priorities that these regulators should consider when determining how to regulate the new digital asset market.
While the SEC is looking to regulate the cryptocurrency industry, lawmakers are still debating whether to adopt stablecoin regulation rules. In addition, senior Treasury officials are encouraged by the bipartisan recognition of the risks stablecoins pose. However, some Democrats have yet to take a position on stablecoin legislation, preferring to work on a more comprehensive cryptocurrency regulation bill.
Senators
Senators from both parties are debating cryptocurrency rules. A new bill by Democratic Senator Kirsten Gillibrand and Republican Senator Cynthia Lummis seeks to extend federal regulations to digital assets like Bitcoin and ether. The proposed legislation would exempt small purchases under $200 from taxes, and it would give the Commodity Futures Trading Commission new authority to regulate the industry. The bill is still in the early stages of the legislative process, and it may not be passed this session.
The legislation has met with strong opposition from cryptocurrency advocates. It would require cryptocurrency brokers to reveal their transactions to regulators. Critics say the proposed legislation will ruin the digital currency industry. However, the Biden administration supports the legislation. The Senate is still debating whether to enact the legislation.
Cryptocurrency advocates say the technology is useful in areas where governments are less trusting. They point to the example of Venezuela. Using cryptocurrencies, they argue, means that governments can’t seize the private keys. In addition, they argue that micro-transactions are possible.
Commodity Futures Trading Commission
With the cryptocurrency industry exploding in size and popularity, the Commodity Futures Trading Commission is weighing new rules to regulate the cryptocurrency industry. The proposed rules would classify cryptocurrencies as commodities and give the CFTC more authority to rein in the industry. The legislation is the result of months of negotiations in the US Senate and House. If passed, the bill would provide long-needed legal definitions for digital assets.
The CFTC is poised to play an increasingly pivotal role in cash digital asset markets, and it’s well-placed to do so. Its mission is to ensure financial stability, market integrity, and individual consumer protection. It has expanded its authority with agricultural, precious metals, and derivatives markets, and it’s now also the regulator of financial indices and swaps.
The CFTC, the SEC, and the Justice Department are coordinating to implement new rules. As the market grows, the government must address the dangers of overvaluing digital assets. The bill will establish the status of exchanges and brokers. This means that exchanges will have to comply with AML/CFT reporting requirements and other regulations.