U.S. crypto rules going on ‘behind closed doors’: Blockchain Association CEO

• According to Blockchain Association CEO Kristin Smith, the industry wants US lawmakers to take the lead on crypto legislation.
• According to Knot, the FSB has an “ambitious work plan” to complete a regulatory framework for cryptoassets by 2023.

Blockchain Association CEO Kristin Smith said in a Feb. 22 Bloomberg interview that despite the process being “extremely long” and regulators “stepping in” in the meantime, the sector wants US lawmakers to lead crypto legislation.

The head of the important US crypto business association informed the US Congress to take control of crypto legislation. This will make it a more “open process” where lawmakers can examine the market “comprehensively.”

Smith noted that while regulators are “moving extremely quickly,” legislation is being developed “behind closed doors,” suggesting that increased industry participation in an “open process” that would be visible to Congress is critical. According to Smith, the problem with regulators enforcing laws and deciding disputes is due to “extremely unique facts and circumstances.”

Challenges for the US Congress

As many people in Washington DC who “were close” to former FTX CEO Sam Bankman-Fried and FTX felt “burned” and “betrayed” by the collapse of the cryptocurrency exchange in November 2022, she added that Congress is in a difficult situation at the present.

According to Smith, Congress has been considering stablecoin regulation “since 2019,” and “the work is done.” He is optimistic that it will soon take place in the United States. Before FTX’s demise, she claimed it “came close” to happening in 2022.

In a letter dated 20 February this year and distributed to G20 finance ministers and central bank governors, Financial Stability Board (FSB) chairman Klaas Knot described how the organization expects to deal with major threats to financial stability this year. DeFi and crypto assets took a significant position on the FSB’s list of challenges.

According to Knot, the FSB has an “ambitious work plan” to complete a regulatory framework for cryptoassets by 2023. The G20 established the FSB, an advisory group linked to the Bank of International Settlements (BIS). It is powerless to impose anything.

Smith went on to say that because crypto risks are different from those associated with conventional financial services, regulators need to spend more time studying market regulation and “tailoring to those risks.”

Crypto rules need higher priority

Public accounting makes it “far more visible” than the existing financial system, according to Smith, who argued that stablecoin and “market-side” regulation should take precedence over bans on crypto-related criminal activities.

The Securities and Exchange Commission (SEC) in the US is cracking down on web3 companies by implementing strict restrictions. Nevertheless, enforcement is happening even though Congress has yet to pass any crypto legislation.

Recently, the organization fined Kraken $30 million and ordered the closure of its stake reward facilities. Paxos was also warned by the SEC of possible legal action for violating securities laws.