Crypto executives have complaints with the SEC and CFTC. Here’s how Chainalysis’ head of policy believes the industry can find common ground with US regulators.
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The US may not embrace crypto, but it needs clear regulation, Chainalysis’ head of policy told Insider.
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The CFTC recently sued Binance, whose chief compliance officer criticized regulators at an industry event.
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Chainalysis’ policy chief says Congress needs to pass crypto-specific legislation.
Caroline Malcolm, the global head of public policy at blockchain data firm Chainalysis, says there’s one thing crypto boosters and skeptics alike can agree on: the US needs better regulation of the industry.
Crypto entrepreneurs have long dreaded what they see as the US government’s hostility to crypto. Some have even speculated that recent developments – such as the shutdown of crypto-friendly Signature Bank – are designed to block the industry from accessing financial institutions. The New York state regulators involved in the closure of Signature have denied these claims.
Similar complaints abounded throughout the Links conference, an industry event recently held by Chainalysis in New York. “At a certain point, you can’t work with a regulator or a jurisdiction that doesn’t want you,” Noah Perlman, the global head of compliance for Binance, which recently faced a lawsuit from the US Commodity Futures Trading Commission, said in an interview on the stage.
Although the US government views crypto largely as a scourge, it still has an interest in protecting consumers, Malcolm said. She told Insider that she believes U.S. regulators have gotten too caught up in how to classify crypto — a debate still rages over whether certain cryptocurrencies are securities or commodities — at the expense of ensuring companies operate responsibly and ethically.
“Even if all you care about is consumer protection and you think this space is ‘bad’, the only way forward is regulation,” she said.
Malcolm said she believes the U.S. needs a specific framework for digital assets like crypto that determines capital and custody requirements of companies, protects against fraudulent trading and ensures consumers receive appropriate investment information.
She pointed to other areas, including Dubai and Switzerland, that have created policy frameworks specifically for digital assets, including crypto. Indeed, some founders have suggested that crypto companies may seek to move abroad because they believe the US regulatory landscape is becoming increasingly tenuous.
On the opposite end of the spectrum, other countries, including China and Egypt, have outlawed crypto altogether. But that approach hasn’t stopped people in those countries from accessing cryptocurrencies, according to Chainalysis’ data, Malcolm said. China, for example, returned to the top 10 in the company’s Global Cryptocurrency Adoption Index in 2022, a year after the country reinstated a ban on crypto.
But according to Malcolm, the US remains in the dark middle, with no clear regulatory stance. It’s not a universal view, to be sure: Some industry skeptics argue that cryptocurrencies clearly meet the definition of securities and that the industry has chosen to ignore legal requirements.
Malcolm said she believes the issue ultimately needs to be resolved through legislation rather than among the various US regulatory agencies, including the CFTC and the Securities and Exchange Commission, which have pursued enforcement against several crypto companies.
“The regulators are working within the mandates they currently have, but without that clarity from Congress,” she said. “Hopefully some of the events of the last few weeks and the last few months will provide that impetus.”
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