Regulatory Chaos in the US
Delivering clear regulatory guidance for digital assets in the US has been a persistent struggle. The SEC oversees securities, while the CFTC regulates derivatives on commodities, leaving a gap for digital assets that don’t fit either category. Amid the chaos, experts urge stakeholders to resist a bearish narrative.
However, former SEC General Counsel and Commissioner at CFTC, Dan M. Berkovitz, believes that legislative amendments are necessary to regulate market regulation with respect to digital assets. He maintains that existing laws can accommodate new technologies, such as cryptocurrencies and blockchain-traded assets.
No Rift Between CFTC and SEC on Digital Assets?
Between 2019 and 2023, the US cryptocurrency industry invested $56.44 million in lobbying. With $20.2 million spent this year alone, showing a paradox between industry influence and regulatory scrutiny. CFTC’s Chairman Rostin Behnam called on Congress for a more central role in establishing a regulatory framework for cryptocurrencies, emphasizing the need for collaboration.
Despite the observed divergence between the agencies regarding the appropriate jurisdiction of cryptocurrencies, Berkovitz insists there is no “rift” between the CFTC and the SEC in regulating digital assets. He maintains that while the agencies coordinate on cryptocurrency issues in the same way they do on others, differences do not rise to the level of a “rift.”
Furthermore, Merkle Science CEO Mriganka Pattnaik stressed that the legislation should clearly define the roles of the CFTC and the SEC in any regulatory framework, simplifying the review process. Any proposal categorized as a security by the SEC should be excluded from eligibility for a CFTC-licensed facility, and the CFTC would assess whether the asset aligns with its criteria for listing and disclosure.
Congress Plays a Crucial Role
Recent events, including FTX founder Sam Bankman-Fried’s conviction, have contributed to the bipartisan support for recent legislation. The industry welcomes the Lummis-Gillibrand bill, which has gained momentum. Patnaik argues for bipartisan support, emphasizing the need for regulatory clarity to protect consumers from scams and abuses.
Hot Take: Urgent Congressional Action Needed
The US needs to provide regulatory clarity to regulate innovation, protect citizens, and respond to new threats, as it has historically done. A bipartisan approach is crucial to prevent further harm to consumers. Rushing a half-baked policy could do more harm than good.
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