Regulatory Reform is More Pressing Than Crypto Industry Reform
Crypto pioneer Jeremy Allaire, co-founder and CEO of Circle Internet Financial, says the FTX collapse proves the industry needs heavy regulation. Unfortunately that is the reaction of too many to SBF’s crypto-Ponzi scheme. Specifically, he is taking to MarketWatch to make the case the Biden administration’s heavy-handed regulatory is what the industry needs.
The problem, as we’ve demonstrated, is crypto didn’t fail, FTX did. The industry hasn’t failed the US Securities and Exchange Commission, the SEC has failed the industry. And uncritically accepting regulations based on an outlier grifter case is as bad as uncritically rejecting any regulation or clarity.
Fortunately, policymakers and regulators globally recognize regulation is necessary. In the U.S., lawmakers in both the House and Senate have been working in a bipartisan manner on legislative solutions that would regulate digital asset exchanges and stablecoins. Congress has never been as close as it is now to providing much-needed rules to protect consumers and support responsible innovation.
As a co-founder of Circle Internet Financial, issuer of payment stablecoin USD Coin USDCUSD, I’ve been helping to build this industry for 10 years and testified at the first-ever hearing on digital currency in the U.S. Senate in 2013. While today I’m surprised by the speed of these incidents, I stand by what I said almost a decade ago:
“As this technology moves from early adopters into mainstream acceptance, it is critical in my view that Federal and State governments establish policies surrounding digital currency that uphold consumer protections associated with fraud and privacy risks, ensure that criminals and bad actors find it increasingly difficult to utilize these platforms and provide clarity to consumers and businesses that conduct business using digital currency.”
President Joe Biden issued an urgent call to Congress more than a year ago to establish a national regulatory framework for payment stablecoins. Payment stablecoins are the medium of exchange in the digital asset economy and are increasingly used within the traditional financial system because of their propensity to make it faster, cheaper and more convenient to send, spend, save and store money.
Transparency is one of Circle’s core values. Circle is regulated under state money transmission licenses across the U.S., the same standards that govern major U.S. payments companies including Venmo, Stripe, PayPal and others. Circle files audited financial statements with the Securities and Exchange Commission, is compliant with the Bank Secrecy Act, and the composition of Circle’s reserves — composed of U.S. Treasury bills and cash — are published on its website down to the CUSIP level.
In contrast, many offshore businesses operate from undisclosed locales and are not subject to U.S. regulatory oversight, subjecting U.S. consumers to unnecessary risk. Federal regulators should be armed with more tools to ensure the safety and soundness of any stablecoin issuer that does business with Americans.
The very fact that, if true, Circle Internet Financial has self-regulated and adopted a transparency policy. This shows that self-regulation works. Silvermint has its own commitment to radical transparency, the kind that only Web3 can ensure.
He’s not wrong about this, but the “dynamic private sector” he references won’t exist in crypto if this regulatory body is adopted.
This legislative activity comes at a time when some of the world’s largest economic zones are moving forward with comprehensive legislation designed to displace the U.S. dollar as the world’s reserve currency. China, for example, has launched its own government-run alternative payment system that would raise troubling privacy concerns in an open society like ours. The U.S. should allow its more dynamic private sector and open internet models to counter these competing powers and ensure the world does business in digital dollars rather than digital yuans.
As Cointelegraph points out, the SEC’s existing regulatory approach is part and parcel of what allowed FTX to thrive so long. So while regulatory reform is needed, it starts with reforming the regulators.
(Congressman Tom) Emmer has been vocal against Gensler’s “indiscriminate and inconsistent approach” toward crypto oversight. On March 16, the Congressman revealed being approached by numerous crypto and blockchain firms that believed Gensler’s reporting requests to be overburdensome and stifling innovation.
We are even more concerned now as we've seen his strategy miss Celsius, Voyager, Terra/Luna-- and now FTX.
— Tom Emmer (@RepTomEmmer) November 25, 2022
Congressman Emmer had previously asked the SEC to comply with the standards established in the Paperwork Reduction Act of 1980, which was designed to reduce the total amount of paperwork burden the federal government imposes on private businesses and citizens.
On an end note, Emmer said that “Congress shouldn’t have to learn the details about the SEC’s oversight agenda through planted stories in progressive publications,” adding that he was looking forward to Gensler’s public testimony before the Financial Services Committee.