PALM SPRINGS, California: Sam Bankman-Fried, former cryptocurrency mogul, has been convicted of stealing at least US$10bil (RM46.65bil) from customers and investors. This serves as yet another blow to the cryptocurrency industry. However, despite these developments, there appears to be little interest in enacting regulations in Washington.
Last year, when cryptocurrencies experienced a collapse and several companies failed, the US Congress deliberated on various approaches to regulate the industry in the future. However, most of these efforts have made little progress, as the focus this year has been on geopolitical tensions, inflation, and the upcoming 2024 election.
Ironically, Bankman-Fried’s FTX downfall and subsequent arrest may have contributed to the delay in momentum for regulation. Prior to FTX’s collapse, Bankman-Fried used millions of dollars, which were illegally obtained from his customers, to influence discussions on cryptocurrency regulation in Washington and advocate for action.
In absence of Congress, federal regulators such as the Securities and Exchange Commission (SEC) have taken their own enforcement action against the industry. This includes filing lawsuits against major cryptocurrency exchanges Coinbase and Binance.
More recently, PayPal revealed that it had received a subpoena from the SEC concerning its PayPal USD stablecoin. The company stated that it is cooperating with the SEC’s document production request.
Despite these regulatory actions by federal agencies, Congress has yet to take significant steps in this direction.
Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark., introduced a proposal last year to grant regulatory authority over cryptocurrencies Bitcoin and Ether to the Commodities Futures Trading Commission (CTFC). This proposal was put forth by Stabenow and Boozman, who lead the Senate Agriculture Committee with jurisdiction over the CTFC.
However, one obstacle in the Senate has been Sen. Sherrod Brown, D-Ohio, the chair of the Senate Banking Committee. Brown has been highly skeptical of cryptocurrencies and has been reluctant to regulate them. While he has conducted several committee hearings on cryptocurrency issues, ranging from their negative impact on consumers to their use in illicit activities, he has not advanced any legislation out of his committee.
In response to Bankman-Fried’s conviction, Brown issued a statement expressing the need to crackdown on crypto abuses and prevent the industry from creating its own rules.
In the House, a bill that aims to establish regulatory guidelines for stablecoins, which are backed by assets like the US dollar, passed the House Financial Services Committee. However, the bill has not garnered support from the White House or the Senate.
President Joe Biden signed an executive order last year urging the Federal Reserve to explore the creation of a digital currency. However, no progress has been made in that regard.
Consumer advocates are skeptical about the necessity for new rules, as they argue that existing securities and commodities laws cover most actions of the crypto industry. They view the industry as being utilized by speculators, financial predators, and criminals. On the other hand, cryptocurrency advocates emphasize that Bankman-Fried’s trial should not tarnish the entire industry, stating that regulatory clarity is needed.
“As the jury found, this was a clear case of fraud committed by a small group of individuals. It’s an unrelated fact that the US needs regulatory clarity in the digital asset space. Policymakers were focused on this reality before this trial, and will continue to focus on it going forward.” – AP
