U.S. Regulators Want to Establish Proper Crypto-Regulations
U.S. regulators will be requesting Congress to look into establishing federal oversight for cryptocurrency exchanges. Jay Clayton, chairman of the US Securities and Exchange Commission (SEC), will be delivering a testimony before the Senate on the 6th of February. His testimony will go over how American regulators have been monitoring the crypto-market so far. Moreover, he is expected to ask Congress to assist the SEC and the US Commodity Futures Trading Commission (CFTC) in determining whether more regulations in cryptos will be required at the federal level. He’s also expected to ask Congress to consider policies and regulations which could “bring clarity and fairness to this space”.
It’s possible that the focus of the testimony might be on potentially dangerous loopholes in current regulations pertaining to the cryptocurrency market. Presently, the regulatory framework around crypto-trading exists mainly at the state level. Moreover, current crypto regulations only seem to apply to very specific cases of monetary transfer services. Notably, authorities might be expressing the need for increased regulations, particularly for crypto-exchanges, due to several cyber hacks such as the recent Coincheck hack during which million worth of NEM tokens were stolen.
U.S. Regulations on Crypto are Inadequate
Mr. Clayton stated that the existing regulatory framework for cryptocurrencies is not effective in monitoring the current type of crypto-related activity. U.S. regulators, particularly the SEC, have made ICOs their focal point. According to the SEC chairman, ICOs are actually securities offerings. Therefore, they must be registered with his agency. However, none of the ICOs that have come out so far have registered with the SEC. This might be due the fact that the startups behind the numerous ICOs which have been launched are not even aware of the legal requirements they have to follow.
Back in 2015, the CFTC classified Bitcoin as a commodity. Since then, the U.S. regulator has been after crypto-trading platforms who might have engaged in fraudulent activities. The CFTC has also been tasked with monitoring Bitcoin futures contracts that are now offered by the CME Group and the Cboe. J. Christopher Giancarlo, chairman of the CFTC, stated that his agency’s authority only extends to the derivatives market. Per the CFTC head, the bulk of trading happens on spot market exchanges, and neither the SEC nor the CFTC has the authority to regulate these exchanges.
Crypto Regulators Have Become More Aggressive
Although the CFTC does not currently have the authority to regulate crypto-exchanges, it can still subpoena an exchange. Notably, Tether was sent a subpoena by the CFTC back in December 2017. As most crypto watchers are aware, Tether claims that its tokens are backed with fiat currency (dollars). However, many people in the cryptosphere suspect that Tether is part of a huge scam. There are some signs that Tether could be involved in fraudulent activity because there was a dramatic increase in its token supply (USDT) back in December when Bitcoin and the crypto-market hit record highs. If it is found guilty of foul play, then it could be a disaster for the crypto-market.
Whatever the real story is, U.S. regulators, and regulators worldwide, in general, won’t be shying away from clamping down further on crypto-related activity considering they have become quite aggressive in their efforts. This is especially true if they suspect foul play. The sad thing is that cryptocurrencies, and their underlying blockchain technology, are truly revolutionary. They have enormous potential to be used in a manner which could greatly benefit society. However, due to the illegitimate activities of a number of entities, the whole crypto-market has to suffer, which is clearly not fair. Hopefully, American regulators can find a way to handle digital currencies in a manner that will promote healthy growth in the market, while weeding out the criminals.