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Bipartisan proposals for legislation to regulate the business have been sparked by the crypto catastrophe caused by the digital currency exchange FTX, but at least one influential legislator is advising caution.
Sherrod Brown, the chair of the Senate Banking Committee and a vocal opponent of cryptocurrencies, said on Tuesday that he is considering holding a hearing on the FTX fiasco and has spoken to the Securities and Exchange Commission about the crisis.
But Brown told reporters he wasn’t sure whether legislation was necessary, noting that the crypto business itself might have a big impact. Brown’s support is essential because his committee is tasked with creating the laws that regulate organizations like the SEC and federal banking regulators that are likely to participate in regulation. A plan that would give the Commodity Futures Trading Commission, the SEC’s sibling organization, control over digital assets is being worked on by the Senate Agriculture Committee, which he is a member of.
He criticized Republicans, saying, “You’ve got a whole political party here that is always in the pockets of the major financial institutions, whether it’s a crypto company or whether it’s JPMorgan Chase.”
“Accordingly, passing legislation is never easy. We rely on regulators so frequently because of this.
Even in the wake of a crisis that is exposing regulatory flaws, Brown’s cautious approach to crypto legislation in the face of mounting pressure for a bill emphasizes how challenging it will be for Congress to agree on a solution. After declaring bankruptcy on Friday, FTX, previously one of the biggest exchanges in the sector and a leading voice in Washington, is being investigated to see if customer cash were misappropriated.
Sen. Cynthia Lummis (R-Wyo.), a proponent of the industry who has co-authored a different comprehensive regulation bill with Sen. Kirsten Gillibrand, declared that “this is now a front-burner issue” (D-N.Y.).
“We have put ourselves at a regulatory disadvantage in dealing with the lack of consumer protections by going for months and months without tackling the digital asset business that has evolved so swiftly.”
Legislators still need to decide on two important issues: whether agencies already have enough power to regulate the market, and if not, which agency should have that authority.
SEC and CFTC officials are competing for control of the cryptocurrency market, and legislation has begun to emerge from Capitol Hill that reflects this division.
A digital currency measure, according to Sen. Elizabeth Warren (D-Mass. ), must be “extensive,” covering consumer rights, anti-money laundering guidelines, and environmental safeguards for crypto mining.
She responded that the SEC “could do more with the current authorities but in order to regulate this entire field we need more legislation from Congress,” when asked if the agency already had enough authority.
The topic of whether the SEC should serve as the principal regulator, according to Warren, is “open.”
Warren told reporters, “The SEC has definitely demonstrated in the past that it has a strong leaning toward consumer protection, but it also needs additional resources to carry out its existing jobs.
A bill that would give the CFTC more authority to regulate cryptocurrency trading is being supported by the senators who head the Senate Agriculture Committee. Currently, the CFTC is largely concerned with financial derivatives like futures contracts.
Sen. John Boozman (R-Ark.) and Senate Agriculture Chair Debbie Stabenow (D-Mich.) introduced the bill, which is being scrutinized in the aftermath of the FTX collapse because the firm was a significant lobbying force for it. The idea, according to SEC Chair Gary Gensler, is “too light-touch.”
According to Boozman, the committee is collaborating with the CFTC and other parties “to make sure that the legislation that we suggested would safeguard situations like this from happening and protect consumers,” he said in an interview.
People are currently attempting to determine why it imploded, according to Boozman. “Until you are fully aware of what is occurring, you cannot truly understand the changes.”
Sam Bankman-Fried, the former CEO of FTX, was questioned in an interview about whether he contributed to the bill’s creation. Stabenow responded that “we took input from everyone involved who was interested in having a transparent system that provides accountability and regulation — so certainly we took his input.”
She stated, “The chair of the CFTC, the SEC, Treasury – we’ve engaged with everyone, because my worry has been exactly this. There are currently no consumer protections in effect, and the CFTC lacks the legal ability to intervene without a crisis.
“We need [the law] more than ever,” Stabenow added, citing the FTX collapse as an illustration.
Whether or not industry had involvement, said Sen. Cory Booker (D-N.J.), a member of the Agriculture Committee, “that’s always going to happen.”
According to Booker, “this bill is a bipartisan law” that prioritizes consumer protection.
The plan “needs considerable revision,” said to Brown, a member of the Agriculture Committee. He added that he was still working on the idea to make sure it was as forceful as it should be.
He claimed that because of its “limited authority,” the CFTC should be “active.”
According to Brown, the financial industry’s involvement on matters of financial regulation—in this case, the opinions of crypto businesses on crypto bills—”is always larger than it should be.”
He said, “I normally think so and everything I see tells me that.
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