US senator unveils bill to protect crypto exchanges from SEC overreach

A Republican senator recently proposed a new bill to protect crypto exchanges from regulatory overreach, the latest effort by the US senator as concerns grow that the US Securities and Exchange Commission (SEC) appears to be overstepping its bounds.

The bill, called the Digital Clarity Act of 2022, and introduced by Bill Hagerty of Tennessee, would act as a safeguard against regulatory overreach in crypto exchange platforms and clean up regulations regarding virtual assets.

At least someone has the right idea

The growth of cryptocurrency has been particularly remarkable in recent decades. It is shown not only in the greater number of participants, but also in the growing interest of large institutions.

As a result, the number of crypto exchanges has increased rapidly to the extent that problems begin to arise.

As the activities related to digital assets and crypto exchanges raise a number of important questions, the authorities urgently require a legal framework to regulate the sector.

Numerous bills have come to the fore, but the SEC has caused the biggest concern due to its notorious stance against crypto. On top of that, the current lack of regulatory certainty has driven away digital asset investment in America.

This status quo, as Haggerty outlined in the press release, is pushing entrepreneurs and businesses to seek other markets with regulatory clarity for digital assets, rather than navigating, “the significant regulatory ambiguity in the United States.”

Investors have less opportunity to hold on for long-term growth, and when they change businesses, the rate of job creation is likely to slow. The regulatory ambiguity poses a serious threat to the industry’s growth in the United States.

“This legislation is an important step toward providing digital asset intermediaries with much-needed security and removing the barriers to entry that currently impede the growth and liquidity of US cryptocurrency markets,” said the senator.

The proposal to shield cryptocurrency exchanges did not specify which SEC enforcement actions would be shielded.

This is the second bill Hagerty has proposed this year; the first was the Stablecoin Transparency Act, which aims to define which cryptoassets qualify as stablecoins and how they are backed.

Regulatory needs and challenges

This year’s central theme must be the requirement that the use of cryptocurrency be governed by relevant regulations. Despite the industry’s explosive growth, cryptocurrency regulation remains a challenge, especially in the United States.

However, the absence of comprehensive regulation is not the result of a lack of will on the part of the authorities.

The problem with the development of supervision and regulation is actually the rapid development of technology around cryptocurrencies, which creates challenges for the authorities to keep up with the development.

Cryptocurrency is very complex with many aspects that need to be carefully studied to define it accurately in the legal framework.

People will also see the failure on a number of crypto exchange platforms during this year. The vast majority of these financial institutions are governed by a minimal amount, if any, of regulatory oversight.

Although these platforms resemble traditional banks but are blockchain-based, this business model is unsustainable due to the absence of oversight or regulation over their operations.

This approach has problems when the market shows signs of unpredictability and it is clear that some platforms do not have sufficient deposits to enable consumer withdrawals.

The failure of these platforms serves as a warning that regulations are necessary before institutional players can make significant inroads into the digital asset market.

While linked transactions are growing, there are currently no laws that control cryptocurrencies or recognize their legality. As a result, the authorities find it difficult to deal with tax collection, law enforcement, prosecution for crypto-related behavior, etc.

It is therefore important to establish a clear and transparent procedure as soon as possible that is based on national experience.