Crypto Regulation Is On The Way
Regulatory clarity for crypto will help the industry move forward in the US and Europe.
Where US Crypto Regulation Stands Today
Congress has introduced multiple pieces of legislation related to cryptocurrencies and blockchain technologies. The legislation includes the Digital Commodity Exchange Act of 2022, the Lummis–Gillibrand Responsible Financial Innovation Act, and the Digital Commodities Consumer Protection Act of 2022.
All three bills aim to have the CFTC regulate cryptocurrency trading unless the law defines them as a security, in which case Gary Gensler and the SEC would control them instead.
The CFTC and the SEC have attempted to regulate cryptocurrencies, but they have done so differently. These bills would clarify their respective regulations and provide additional guidance for the industry.
SEC and CFTC Joint Oversight on Digital Asset Markets
Representatives of financial companies, Timothy Massad and Howell Jackson, have been working to make the case that the SEC and the CFTC should establish a joint oversight body to regulate cryptocurrencies.
Timothy Massad is a member of the PayPal Advisory Council on Blockchain, Crypto, and Digital Currencies. Howell Jackson is an independent trustee of CREF and affiliated TIAA-CREF mutual funds.
The two have issued a paper stating that a self-regulatory organization (SRO) to regulate crypto could be established without the need for the passage of an Act by Congress.
Their proposal builds upon existing frameworks used to govern the futures and options marketplaces and does so without undermining the authority of either the CFTC or the SEC. Instead, they propose that both agencies oversee the SRO.
Moreover, they've highlighted how their proposal avoids the pitfalls of creating a separate cryptocurrency-specific regulator because it allows regulators to focus on the risks posed by specific products rather than addressing broader questions about how to treat digital assets generally.
How Europe will Regulate Crypto
The European Union has approved a draft set of regulations for cryptocurrencies called Markets in Crypto-Assets (MiCA).
MiCA has an 18-24 months transition period before the new laws come into force, so they will start by the beginning of 2024.
The MiCA regulation, first proposed in 2020, covers many aspects of crypto and defines required licensing. In addition, it grants companies operating in one country within the European Union access to the entire European market.MiCA will also provide a regulatory “sandbox,” which will help new crypto-related businesses test concepts before needing to comply with all regulations.