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This is a significant year for the crypto industry, which has seen the massive collapse of Terra/Luna and crypto exchange FTX, wiping over $2 trillion from the entire crypto market since November 2021 highs. was.
As a result, regulators are under more pressure to closely monitor the industry and create strong regulations. Before we see any progress, here are some big issues that still remain.
Is crypto a commodity or a security?
There is currently no overarching plan to regulate cryptocurrencies, and one of the major remaining issues is how to classify cryptocurrencies accurately, said Edward Moya, Senior Market Analyst at OANDA. increase.
According to Securities and Exchange Commission Chairman Gary Gensler, crypto is security. SEC v. The Howey Test, derived from his 1946 Supreme Court decision in WJ Howey Co., defines a security as money invested in a common enterprise with the expectation of profit from the efforts of others. increase.
“Promoters are marketing and investors are buying most of these tokens to advertise or expect profits based on the efforts of others,” Gensler said in a September statement. . In that case, the crypto will be registered with the SEC.
The SEC has already made some moves. In May, he announced that he would crack down on crypto by doubling the size of his crypto assets and cyber units.
Others in the industry believe that cryptocurrencies behave like commodities, in which case they would fall under the jurisdiction of the Commodity Futures Trading Commission.
“The advantage of CFTC is that it has experience in other derivatives, so it is well positioned to work with those promoting cryptocurrencies,” said Moya.
In an interview with MarketWatch, Yesha Yadav, law professor and associate dean of diversity, equity and community at Vanderbilt University, said it was very difficult to reach consensus on what the classification of cryptocurrencies should be. said to be difficult. Yadav said Congress needs to come to a conclusion by clarifying how to classify cryptocurrencies, as it will give a clearer answer on what the regulation will look like.
What are the legislative options?
There are multiple bills, Yadav said, but it’s hard to tell which bill is better than the other. Loss of billions of dollars in customer deposits.
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The Senate bill, sponsored by Michigan Democrat Debbie Stabenow and Arkansas Republican John Boozman, would require all digital commodity platforms, including trading venues, brokers, dealers, and customers, to register with the CFTC, allowing cryptocurrencies to Regulation than the SEC that gives more power. Digital commodity platforms must also prohibit fraudulent trading practices, disclose conflicts of interest, ensure strong cybersecurity, and report suspicious transactions.
The bill, which was backed by Senator Cynthia Ramis, a Republican from Wyoming, and Kirsten Gillibrand, a Democrat from New York, divides digital assets into commodities, securities, and ancillary assets. The bill defines ancillary assets as cryptographic tokens. It provides no profit or revenue sharing or any other financial benefit to the owner, even though the value fluctuates over time.
Under the bill, crypto issuers would be required to make certain disclosures to the SEC. Digital asset issues are presumed to be commodities and are therefore subject to CFTC regulation, easing tensions between the SEC and other federal agencies.
Policy researcher Owen Telford said, “Especially since each agency has its supporters, many of which are driven by the political positions of lawmakers themselves, it’s hard to predict which bills will win over others next year. It’s hard to do,’ said Beacon Policy Advisors in an interview with MarketWatch. “So I don’t know if we’ll necessarily get a clear result on which agency should take the lead next year.”
“There are people like Senate Banking Committee Chairman (Sherrod) Brown who is questioning crypto regulation as a whole because he believes you should provide legitimacy to an asset class,” Telford said. Because I’m not sure,” he said. Brown, an Ohio Democrat, said he would play “a key role in passing any kind of cryptography law. It’s not clear at this point whether he’ll necessarily endorse it.”
Bitcoin BTCUSD,
Ethereum ETHE, down 63.57%
Both are down 66.88% according to CoinDesk data. According to data from CoinMarketCap, the global cryptocurrency market capitalization is at $81.187 billion, increasing by 1.53% over the past 24 hours.
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