The conviction of former cryptocurrency mogul Sam Bankman-Fried for stealing at least $10 billion from customers and investors is the latest black mark for the industry, but in Washington there is little to no action being taken in pushing through regulation.
When the cryptocurrency market collapsed and numerous companies failed last year, Congress contemplated multiple approaches to regulate the industry. However, due to the chaotic year with geopolitical tensions, inflation and the upcoming 2024 election, most of those efforts have gone nowhere.
It is ironic that the failure of Bankman-Fried’s FTX and his arrest late last year may have contributed to the momentum for regulation stalling out. Before FTX imploded, Bankman-Fried had illegally taken money from his customers and spent millions to influence the dialogue in Washington and push for action.
Without Congress, federal regulators such as the Securities and Exchange Commission (SEC) have taken their own enforcement actions, such as filing lawsuits against Coinbase and Binance, two of the biggest cryptocurrency exchanges. Most recently, PayPal has been served with a subpoena from the SEC requesting documents – a request PayPal is cooperating with.
Despite this, Congress still has yet to take any action. Sens. Debbie Stabenow and John Boozman proposed to give the Commodities Futures Trading Commission (CTFC) regulatory authority over cryptocurrencies bitcoin and ether. However, Sen. Sherrod Brown, chair of the Senate Banking Committee, has been highly sceptical of cryptocurrencies and has been reluctant to permit Congress’ blessing on them through regulation.
Consumer advocates do not believe new rules are necessary. Dennis Kelleher, president of Better Markets, believes “everything the crypto industry does is clearly covered by existing securities and commodities laws” and Bartlett Collins Naylor, a financial policy advocate for Public Citizen’s Congress Watch is also of the same opinion.
On the other hand, cryptocurrency advocates point out that it was Bankman-Fried on trial, not the entire industry. Sheila Warren, CEO of the Crypto Council for Innovation, believes policymakers were already focused on the need for regulatory clarity in the digital asset space before the trial and will continue to be after.
President Joe Biden signed an executive order last year, urging the Federal Reserve to explore whether they should create a digital currency, however, there has been no movement on that front.
It remains to be seen if Congress will act on cryptocurrency regulation.