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Anushree Dave
Congress Considers Various Bills, But Fundamental Issues Remain
This year has been significant for the crypto industry, which has seen the high-profile collapses of Terra/Luna and crypto exchange FTX, wiping more than $2 trillion from the entire crypto market since November 2021 highs. It was the year
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. .
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 the crypto dynamics,” 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 is difficult to tell which bill will win over the others. They were all designed before the epic collapse of crypto exchange FTX, which filed for bankruptcy in November. After billions of dollars in customer deposits disappeared.
See also: New accusations link Bankman-Fried to damning FTX allegations with testimony from ex-girlfriend Ellison and fellow co-founders
Senate Bill Proposed by Michigan Democrat Debbie Stabenow and Arkansas Republican John Boozman Gives Greater Power By Mandating All Digital Commodity Platforms, Including Trading Venues, Brokers, Dealers and Customers, to Register with the CFTC Thing. More in crypto regulation than in the SEC. 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: “Some bills will outperform others over the next year, especially since each institution has its supporters, many of whom are overshadowed by the political positions of their members. It’s hard to predict who will win,” said Beacon Policy Advisors in an interview with MarketWatch. “So we don’t know if we’ll necessarily get a clear result on which agency should take the lead next year.”
Telford said, “There are people like Senate Banking Committee Chairman (Sherrod) Brown who is questioning crypto regulation as a whole. 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, but at this point it’s not clear that he would necessarily support it.”
Some question whether crypto regulation is necessary at all. In a lecture hosted by the Brookings Institution at Think Thanks in Washington, D.C., Steven Cecchetti, an economist and professor at the Brandeis International School of Business, argued that cryptocurrencies should not be regulated.
In his speech, Cecchetti said, “I think the strongest argument against regulation is to give it legitimacy,” adding, “Cryptocurrency does not support the real economy, so justifying it is not productive. It just takes creative resources away from the activity,” he added. .”
Meanwhile, other prominent figures like Democratic Senator Elizabeth Warren are calling for tougher crypto regulation after the fall of FTX.
So far this year, Bitcoin is down 64.05% and Ethereum (ETHE) is down 67.44%, according to CoinDesk data. According to data from CoinMarketCap, the global cryptocurrency market capitalization is at $79.811 billion, down 0.15% over the past 24 hours.
-Annushree Dave
(Closed) Dow Jones Newswire
12-29-22 1306ET
Copyright (c) 2022 Dow Jones & Company, Inc.
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