Joe Biden’s Administration Implores Expedition of Crypto Regulations
President J. Biden’s government has urged Congress to pass legislation clarifying how digital currencies should be regulated, warning that delays on Capitol Hill could endanger investors.
Both Cryptos and Brokerage Firms Are on the Spot
The US Financial Stability Oversight Council, which includes the Treasury, issued a report on Monday urging politicians to reach an agreement on a number of issues, including how to regulate BTC and other crypto assets traded on the spot market.
The report comes as members of Congress debate proposals ranging from tax rules for crypto brokers to the $140 billion stablecoin industry. Even as Biden administration officials are concerned about loops of the notorious TerraUSD collapse, those close to legislative negotiations say they are still months away from passing legislation.
The FSOC report came as the crypto industry was reeling from a historic drop in prices and several prominent companies declared bankruptcy, raising questions about who should be in charge of the volatile market.
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have sought legal authority over the industry. Since a large number of tokens meet the criteria as securities under US law, SEC chair Gary Gensler has contended that most cryptos — and the platforms on which they’re traded — ought to be regulated by the SEC.
A Treasury official stated that the report’s authors, which included Gensler and CFTC Chair Rostin Behnam, did not intend to favor one agency over another.
Many crypto asset activities, according to the report, lacked “basic risk controls to protect against run risk or to help ensure that leverage is not excessive.”
Furthermore, the report stated that “crypto asset prices appear to be largely fueled by speculation instead of being grounded in prevailing important macroeconomic use cases, and prices have repeatedly recorded significant and broad declines.”
More From the Report
According to the FSOC report, inter-agency cooperation is needed to close existing loopholes that allow crypto asset businesses to find the most favorable regulation for their operations.
“Some crypto asset firms may have affiliations or subsidiaries operating under very unique regulatory frameworks, and thus no standard regulations authority may be aware of the risks across the entire business,” says the report.
To that end, the FSOC recommended that Congress pass legislation authorizing federal market regulators to issue rules governing crypto asset markets that are not covered by existing US securities laws.
Conflicts of interest, exploitative trading practices, customer asset segregation, cyber security, and record-keeping should all be covered by the rules.
The report also urges Congress to pass legislation granting regulators access to crypto platform subsidiaries and to establish a federal framework for stablecoin issuers.
While traditional finance’s exposure to crypto activity is limited, it could “increase rapidly,” according to the group of regulators. Examples of potential interconnectedness between traditional finance and crypto include stablecoin activity, leveraged trading, and asset custody.
The White House refrained from endorsing a digital dollar, but the Treasury Department will head a group of government organizations that will study a central bank digital currency.
