There is currently a patchwork of digital asset regulations in the US between state and federal governments. The lack of uniform guidance has created a growing concern that the industry will look to other jurisdictions. Many foreign countries are establishing their own Crypto regulations. How will the US respond and follow others that are leading the way?
Lasting structures are often developed by those that are innovative early. In Europe, regulators are moving ahead with MiCa, a legal framework for bitcoin and cryptocurrencies known as Markets in Crypto Asset Regulation. MiCA sets up licensing requirements for exchanges and wallet providers across the 27 member countries of the EU, including a need for checking user identity. Capital requirements will be outline, to prevent liquidity issues the industry has already seen. This will be the first attempt to establish a strategy that other countries could follow.
SEC vs. CFTC
U.S. policymakers are struggling with what seems to be an epic dual between government agencies: SEC vs. CFTC. The U.S. Congress has not acted to bring legislation forward, thus pitting industry regulators. The Securities and Exchange Commission (SEC) wants digital assets to be considered securities, so they can act as enforcement agents. Conversely, the Commodity Futures Trading Commission (CFTC), views Crypto as a currency and, therefore, sees digital assets as a commodity regulated by the Commodity Exchange Act of 1934 (“CEA”). The CFTC will regulate derivatives of cryptocurrencies, but not the currencies directly.
To be sure, this is also a battle of personalities. SEC Chair Gary Gensler is focused on investor protection. He is seen as very outspoken and heavy-handed as the SEC brought several recent civil lawsuits forth around unregistered and fraudulent securities offerings. CFTC Chair Rostin Behnam, conversely, is a social media influencer. He is calling for his agency to be the agency of record, as he supports the proposed U.S. Senate bill 4760, the Digital Commodities Consumer Protection Act of 2022 (DCCPA). It gives the CFTC agency oversight authority to regulate cryptocurrency assets the same way they do other derivatives markets.
Watch for updates on digital asset regulations here on the D2 website.