Confusion and Haste in Washington Over Crypto as Election and Global Recession Loom
The Federal Reserve is on the brink of causing a global recession, according to a new UN report, so naturally the solution is – more crypto regulation?
This gets even weirder. The Biden administration is pushing Congress to hurry up and pass a crypto regulation bill, even as the US Senate majority leader announced that there will be no more votes until after the mid-terms elections.
The Biden administration has urged Congress to accelerate the rollout of a regulatory framework for crypto and digital assets as a United Nations report warns of a Fed-induced global recession.
The pressure is mounting in the United States to speed up its crypto regulation process, and officials have warned that further delays could put investors at risk.
According to the Financial Times, the U.S. Financial Stability Oversight Council issued a report on Oct. 3 urging lawmakers to come to an agreement on regulating crypto spot markets. Officials close to the congressional negotiations said they were still “months away” from passing legislation, meaning that nothing is likely to happen this year.
Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been grappling for authority to regulate digital assets, the former wanting to class them as securities which would be a huge step backward for the industry.
However, the FSOC’s report suggested inter-agency cooperation to close any loopholes that allow operators to find favorable regulations. It stated:
“Some crypto asset businesses may have affiliates or subsidiaries operating under different regulatory frameworks, and no single regulator may have visibility into the risks across the entire business.”
Legislators and regulators are all over the place on this, with some focusing on the need for regulatory clarity on whether crypto and tokens are securities or commodities, and now a report out Monday from the Financial Stability Oversight Council focusing specifically on addressing the problem of stablecoins.
There are at least two bills pending in Congress that show promise. One is from Senate Agricultural Committee Chair Sen. Debbie Stabenow, D-MI.
Senate Agriculture Committee Chair Debbie Stabenow, D-Mich., authored a bill to give the Commodity Futures Trading Commission more power over non-security cryptocurrency markets. Currently the CFTC wields power over derivatives and futures, but not actual spot markets for bitcoin and ether, the two digital assets not currently treated as securities. CFTC Chair Rostin Benham has testified in favor of that legislation, which has not yet received a committee vote, though (SEC Chairman Gary) Gensler told Congress that having multiple regulators focused on crypto could undermine oversight efforts.
Stabenow’s bill would undercut Gensler’s authority. Gensler took to CNBC’s Squawkbox Monday to double down on his assertion that the SEC has unassailable authority over crypto and that all tokens are securities under his aegis.
"The law is clear on this. I believe based on the facts and circumstances most of these tokens are securities," Gensler said on CNBC. "When a group of entrepreneurs is raising money from the public and they're anticipating a profit, they need disclosure."
The other promising bill is from Sen. Bill Haggerty, R-TN, that would create a two-year safe harbor for crypto exchanges.
Sen. Bill Hagerty (R-Tenn.) has introduced a bill to create a safe harbor for cryptocurrency exchanges that might otherwise face legal action for listing unregistered securities.
According to text of the bill obtained by The Block, the legislation would allow for a two-year grace period from enforcement actions by the Securities and Exchange Commission against crypto exchanges that list tokens deemed by the commission to be unregistered securities. The grace period would begin when the commission makes a determination that a token is an unregistered security. Exchanges would also not be subject to legal action for failure to register as a broker-dealer or national securities exchange during the grace period.
The chances of any bill passing before the midterms are slim and none, but this first Monday of October serves as a perfect snapshot of how little foresight is being put into what could determine the fate of an emerging, game-changing industry. Incoherence and haste are not what we need. The crypto space and the American people deserve better than the approach we’re seeing right now.