There is a plan to regulate crypto and stack coins. Here’s what you need to know: NPR
There is broad agreement that some regulation is necessary, but who will do it is up for debate.
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Chris McGrath / Getty Images
There is broad agreement that some regulation is necessary, but who will do it is up for debate.
Chris McGrath / Getty Images
Things are changing fast in the crypto world.
Prices were at staggering heights in November, and then came the crash. In just a few weeks in May, cryptocurrencies lost more than half a trillion dollars in market value.
The most spectacular implosion was a cryptocurrency called TerraUSD. It was a stable currency – meaning that the value was meant to be linked to US dollars through a complicated algorithm.
Instead, it broke down and is now practically worthless.
The crash resumed demands for new rules to govern a cryptocurrency market that is still something of a wild border. And now we have perhaps the biggest step yet towards new crypto-regulation.
Two senators – a Republican and a Democrat – joined forces to unveil a broad new bill last week. But skeptics are already warning that it is a step backwards and is far too crypto-friendly.
Let’s unpack what’s going on and why it’s a big question WHO would regulate crypto.
What is the current setup?
Almost everyone thinks the crypto industry needs some form of regulation.
New cryptocurrencies are born every hour – and with them, a lot of scams and scams. The industry is currently overseen by a patchwork of federal and state regulations, which have not always evolved as rapidly as technology has.
The Securities and Exchange Commission (SEC) has filed dozens of crypto-related enforcement actions in recent years. The same goes for the Commodity Futures Trading Commission (CFTC).
Following the crash in May, Finance Minister Janet Yellen called on Congress to adopt “comprehensive” regulations on particularly stable coins.
Democratic Senator Kirsten Gilibrand of New York says this phase of Internet development – with cryptocurrency and other technologies known collectively as Web3 Poses similar risks as the first days of social media – sometimes called Web2.
“Congress failed to regulate Web2“We failed to set up a regulatory agency across different platforms that is now doing extreme damage to our youth and dividing this country.” We are not going to make the same mistake Web3. “
What is this new bill then?
It was introduced earlier this month by Senator Gillibrand and Senator Cynthia Lummis, a Republican from Wyoming.
It provides a framework for regulating the crypto industry.
This includes tax requirements for various digital assets, and to impose stricter requirements on stack coins, which according to Gillibrand would have denied the TerraUSD coin that imploded in May.
It also contains provisions on cybersecurity, the possible creation of a self-regulatory organization and some disclosure requirements. And that includes provisions requiring the Federal Energy Regulatory Commission to study the energy impact of the cryptocurrency industry.
El Salvador extracts cryptocurrency with 300 computers in the facility powered by Tecapa Volcano.
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El Salvador extracts cryptocurrency with 300 computers in the facility powered by Tecapa Volcano.
Alex Peña / Getty Images
But perhaps most importantly – and what worries skeptics the most – is that the bill defines most cryptocurrency as goodswhich would be monitored by the Commodity Futures Trading Commission (CFTC), instead securitieswhich would fall to the much larger Securities and Exchange Commission (SEC).
The SEC is led by Gary Gensler – one of the sharpest cryptocurrency critics, who has said the crypto industry is “filled with scams, scams and abuse.” He strengthened the SEC’s crypto enforcement team in early May, and after the cryptocurrency crash, he asked Congress for more funding, saying the team was still “out personed.”
But Senator Gillibrand said it made sense for the CFTC to make the heavy promises.
“It would be inappropriate for the SEC to regulate any of these markets because they do not act as securities,” she said. “President Gensler has already said … the words ‘Bitcoin is a commodity’, because he understands that it is a form of value in the same way that gold is a form of value, in the same way that oil is a form of value. value, and that it is more appropriately placed under the CFTC. “
Both senators are optimistic about the future of crypto. Lummis bought her first Bitcoin back in 2013 and owned more than $ 100,000 since her last financial revelation. She said that this bill tried to find a “sweet spot” when it comes to regulation.
“So people who innovate in this area know the traffic rules and people who use the ultimate products know that the consumer protection elements are there,” said Lummis.
The bill is still a long way from becoming law. When it comes to timing a floor poll, Lummis said, “We’ve been talking for months.” She has previously acknowledged that the comprehensive bill could eventually be divided into sections to go through the relevant committees.
What the critics say
There are a number of technology and finance experts who say that cryptocurrency is a purely speculative resource, and one that serves no real purpose.
And this month, a group of them wrote a letter to congressional leaders asking that they: “Ensure that individuals in the United States and elsewhere are not exposed to predatory finances, fraud and systemic economic risks in the name of technological potential that does not exist. . “
One of the signatories was Molly White, a software engineer who runs the blog Web3 is just fine, which documents cases of fraud and disaster in the crypto universe. And she is not in favor of the new bill.
“There’s a lot I think the cryptocurrency industry was hoping to see from regulators, which is a very limited set of regulations that apply to the industry,” she said.
Some in the industry have responded positively so far. The Crypto Council for Innovation called it a significant step forward, and the Blockchain Association called it a “milestone moment.”
One of the biggest problems White has with the legislation is precisely that it leaves most of the regulatory power to the CFTC instead of the SEC.
White says that cryptocurrencies are not like traditional commodities like wheat or oil, so the CFTC should not be the main regulatory muscle.
“Cryptocurrencies are more like securities because people mostly put money into them in hopes of a return on investment,” White said. “And when someone engages in something like an investment, it’s a good sign that it should go to the SEC.”
In addition, White said the CFTC was simply not equipped to handle the workload – although the bill allows the CFTC to impose a fee on the exchange of digital assets to help fund its large role.
“There has to be a big change in the amount of resources that go to the CFTC for them to suddenly take on this huge and much broader set of problems than they have dealt with before,” she said. “And the SEC is honestly just more experienced in this field already.”
