Regulation
The Bankman-Fried trial exposed cryptocurrency fraud, but Congress has been unwilling to regulate the industry
PALM SPRINGS, Calif. (AP) — The ex’s conviction cryptocurrency tycoon Sam Bankman-Fried for stealing at least $10 billion from customers and investors is the latest black mark for the cryptocurrency industry, but there appears to be little to no interest in Washington in passing regulation.
When cryptocurrencies collapsed ea number of companies went bankrupt last year, Congress has considered multiple approaches to how to regulate the industry in the future. However, most of these efforts have gone nowhere, especially in this chaotic year in which it has been dominated geopolitical tensions, inflation and the upcoming 2024 elections.
Ironically, the bankruptcy of Bankman-Fried’s FTX and its subsequent shutdown late last year may have contributed to the momentum toward a regulatory stalemate. Before FTX impaled, Bankman-Fried spent millions of dollars — illegally taken from his clients, it seems — to influence the cryptocurrency regulation discussion in Washington and push for action.
Without Congress, federal regulators like the Securities and Exchange Commission have stepped in to take their own enforcement actions against the industry, including the initiation of legal action against Coinbase and Binancetwo of the largest cryptocurrency exchanges.
And most recently PayPal received a subpoena from the SEC related to its PayPal USD stablecoin, the company said a filing with securities regulators Wednesday. “The subpoena requires the production of documents,” the company said. “We are cooperating with the SEC in connection with this request.”
However, Congress has yet to act.
Senators Debbie Stabenow, D-Mich., and John Boozman, R-Ark., proposed last year hand over regulatory authority over the cryptocurrencies bitcoin and ether to the Commodities Futures Trading Commission. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over the CTFC.
A major obstacle in the Senate was Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee.
Brown has been very skeptical of cryptocurrencies as a concept and has generally been reluctant to give them congressional blessing through regulation. He is detained several committee hearings on cryptocurrency issues, ranging from negative impacts on consumers to the use of currencies to finance illicit activities, but did not advance any legislation out of his committee.
“Americans continue to lose money every day to cryptocurrency-related scams and fraud,” Brown said in a statement following Bankman-Fried’s sentencing. “We must crack down on abuse and we cannot let the cryptocurrency industry write its own rules.”
In the House, a bill that would put regulatory barriers around stablecoins — cryptocurrencies that would be backed by hard assets like the U.S. dollar — passed the House Financial Services Committee this summer. But that bill got no interest from the White House or Senate.
President Joe Biden last year signed an executive order on government oversight of cryptocurrency prompting the Federal Reserve to consider whether the central bank should step in and create its own digital currency. So far, however, there has been no movement on this front.
Consumer advocates are skeptical about the need for new rules.
“There is no need for any special interest crypto legislation that would only legitimize an industry used by speculators, financial predators and criminals,” said Dennis Kelleher, president of Better Markets, a nonprofit that works to “build a safer financial system”. system for all Americans,” according to his website.
“Furthermore, almost everything the cryptocurrency industry does is clearly covered by the existing securities and commodities laws followed by all other law-abiding financial companies in the country,” he said.
Bartlett Collins Naylor, financial policy advocate for Public Citizen’s Congress Watch, said “fraud and securities laws are currently on the books.”
Cryptocurrency advocates, meanwhile, are quick to note that it was Bankman-Fried who was prosecuted, not the entire industry.
“As the jury found, this was a clear case of fraud committed by a small group of individuals,” said Sheila Warren, CEO of the Crypto Council for Innovation. “It is unrelated that the United States needs regulatory clarity in the area of digital assets. Politicians were focused on this reality before this trial and will continue to focus on it in the future.”
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Hussein reported from Lewiston, Maine