Summary: The recent conviction of Sam Bankman-Fried, a former cryptocurrency mogul, for stealing billions from customers highlights the need for regulation in the crypto industry. However, Congress has shown little interest in implementing regulations. Despite the collapse of Bankman-Fried’s FTX and subsequent enforcement actions by federal regulators, Congress has failed to take action. While some senators have proposed handing regulatory authority to the CTFC, Sen. Sherrod Brown, chair of the Senate Banking Committee, has been skeptical of cryptocurrencies and hesitant to support regulation. Only minimal progress has been made in the House, with a bill on stablecoin regulations passing the Financial Services Committee. President Joe Biden’s executive order on cryptocurrency oversight has yet to result in concrete actions. Consumer advocates disagree on the necessity of new rules, while cryptocurrency advocates argue that Bankman-Fried’s case is an isolated incident.
Lack of Interest in Regulation Despite Industry Fraud
The recent conviction of former cryptocurrency mogul Sam Bankman-Fried for stealing at least $10 billion from customers and investors has shed light on the need for regulation in the crypto industry. However, in Washington, there appears to be little to no interest in pushing through regulations. Even with the collapse of Bankman-Fried’s FTX and subsequent enforcement actions by federal regulators, Congress has not taken significant steps towards implementing regulations.
Failed Attempts at Regulation
When multiple companies in the cryptocurrency industry failed last year and cryptocurrencies collapsed, Congress considered various approaches to regulate the industry. However, most of these efforts have not made any progress. The current chaotic year, marked by geopolitical tensions, inflation, and the upcoming 2024 election, has further diverted Congress’s attention away from regulating cryptocurrencies. Ironically, Bankman-Fried’s unlawful actions may have contributed to the momentum for regulation stalling out, as he illegally used his customers’ funds to influence the discussion around cryptocurrency regulation in Washington.
Regulatory Actions by Federal Agencies
In the absence of congressional regulation, federal regulators such as the Securities and Exchange Commission (SEC) have taken matters into their own hands. The SEC has filed lawsuits against major cryptocurrency exchanges Coinbase and Binance. Additionally, PayPal has recently been subpoenaed by the SEC regarding its PayPal USD stablecoin. While federal regulators are attempting to fill the regulatory void, comprehensive industry-wide regulations are still needed.
Stumbling Blocks in Congress
Senators Debbie Stabenow and John Boozman proposed transferring regulatory authority over cryptocurrencies bitcoin and ether to the Commodities Futures Trading Commission (CFTC) last year. However, progress in the Senate has been hindered by Senator Sherrod Brown, chair of the Senate Banking Committee. Brown, who has been skeptical of cryptocurrencies and their potential negative impacts, has been reluctant to support regulatory measures. Despite holding committee hearings on cryptocurrency-related matters, Brown has not advanced any legislation out of his committee.
Limited Progress in the House
In the House, a bill focused on putting regulatory guardrails around stablecoins, which are cryptocurrencies backed by tangible assets such as the U.S. dollar, passed the House Financial Services Committee. However, the bill has received minimal interest from both the White House and the Senate. President Joe Biden’s executive order on government oversight of cryptocurrency has yet to yield significant actions. Although the Federal Reserve was urged to explore the creation of a central bank digital currency, no concrete progress has been made.
Differing Views on the Need for Regulation
Consumer advocates are skeptical about the necessity of new regulations in the crypto industry. They argue that existing securities and commodities laws are already applicable to most activities in the industry. Dennis Kelleher, president of Better Markets, states that the crypto industry is used by speculators, financial predators, and criminals, and does not need any special interest legislation. On the other hand, cryptocurrency advocates emphasize that Bankman-Fried’s conviction is an isolated case of fraud committed by a small group of individuals. They assert the importance of regulatory clarity in the digital asset space and argue that policymakers were already focused on this issue prior to the trial.
Tags: cryptocurrency, regulation, fraud, Congress, FTX, enforcement actions, SEC, bitcoin, ether, stablecoins