US Senator calls for crypto regulations amid 2022 failures

Updated: 03 February 2023

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The Senator for South Carolina, Tim Scott, is working on a bipartisan regulatory framework targeting the cryptocurrency industry. The Senator is set to become a ranking member of the US Senate Committee on Banking, Housing, and Urban Affairs.

US Senator calls for crypto regulations

The Republican Senator said there was a need to address the rapid growth of the digital asset industry, adding that many consumers had entered the industry, and many US investors were interacting with cryptocurrencies.

The Senator referred to the recent losses that crypto investors had suffered following the collapse of some leading players in the industry. He noted that the failures seen in the past year had highlighted the lack of a clear regulatory framework in the industry.

In a memo published Thursday, the Senator noted that,

Several high-profile failures resulted in lost consumer assets, exposed regulatory gaps, and highlighted concerns with illicit finance. Moving forward, the committee should work to facilitate a bipartisan regulatory framework.

Crypto regulations in the US Senate

As a ranking member, Scott will work with Senator Sherrod Brown, who currently chairs the Senate Banking, Housing, and Urban Affairs Committee. Brown is a critic of the crypto industry, and he has previously likened cryptocurrency investments with risky mortgage bonds and over-the-counter derivatives that collapsed during the 2008 financial crisis.

After FTX filed for bankruptcy in November last year, Brown said there was a need to develop a robust regulatory framework that evaluates cryptocurrencies according to their features and not how they are promoted by crypto executives.

Brown also said that financial assets with the features of securities, commodities, or banking assets needed to be under the regulatory scrutiny of the regulatory bodies that supervised such products. The Senator noted that the cryptocurrency industry should not be under-regulated because it is a new asset class receiving much interest.

In November, Brown sent a letter to the US Treasury Secretary Janet Yellen urging her to work on legislation that will empower regulators with authority to regulate the cryptocurrency industry. He noted that with their current powers, regulators did not have enough oversight over cryptocurrency activities.

The collapse of FTX and other top firms in the cryptocurrency sector has increased regulatory attention in the cryptocurrency industry. Some crypto firms are anticipating the change in the regulatory framework, with Binance, Tether, and a16z ramping up their lobbying campaigns in recent months to boost their presence in the United States.

However, legislators are not the only ones concerned about the rapid growth of the cryptocurrency industry in the United States. Billionaire investor Charlie Munger recently called for a ban on cryptocurrencies in the United States.

JUST IN: Berkshire Hathaway's Charlie Munger urges the US government to ban #crypto.

— Watcher.Guru (@WatcherGuru) February 2, 2023

Nevertheless, the US courts are being swarmed with a wide range of cases addressing the crypto market. Amid continuous reports by the United States Securities and Exchange Commission (SEC) that most of the cryptocurrencies in the market are securities, a recent court case determined that secondary market sales do not constitute securities.

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