The Crypto Regulation Race

In an interview with Bloomberg on Monday, the Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behman, commented that regulatory measures for the crypto space are becoming increasingly necessary. In the absence of a clear directive from Congress, Behman further explained how the CFTC is the best equipped and qualified agency to handle that task.  Meanwhile, Gary Gensler, Chair of the Securities and Exchange Commission (SEC), reiterated in a statement on Tuesday that oversight of digital assets should remain under the umbrella of the SEC.    

For obvious reasons, oversight of the crypto space is necessary and inevitable. The recent crash of Luna’s algorithmic stablecoin, an influx in scams, and large-scale thefts have all brought negative attention to cryptocurrencies as well as the platforms and exchanges that support them. In a recent congressional hearing, Janet Yellen, the Secretary of Treasury, asserted regulation was needed before the end of the year. 

Earlier last week, the SEC Cyber Unit doubled in size in order to keep up with infractions of securities law for cryptocurrencies, renaming itself the Crypto Assets and Cyber Unit. There is now a race to the podium regarding which agency will have regulatory power and it will depend largely on how crypto assets are defined moving forward.  If the government defines crypto as a security, commodity, or currency it will fall under the jurisdiction of the SEC, CFTC, or the Department of Treasury respectively.      

While Behman insists the SEC and CFTC engage in interagency communication on how to tackle regulatory issues, there is already increasing competition among the varying branches of government to be first in determining the direction of oversight for crypto.  Securing authority would increase the budget for either agency in addition to the power in shaping the extensive trillion-dollar industry.

Many have felt the government action on the industry to be far behind where it’s needed. President Biden’s Executive Order asked for little more than a detailed report from all corners of the federal government on the industry and the risks it poses. Nothing has been clearly defined since, and legislation is slow to move its way through both the House and Senate. If there was ever a time for the government to focus its collective power on action, that time is now.  Until then, the industry operates in regulation purgatory with nothing more than educated guesses on which way the legislative wind will blow.