2023’s first congressional session ended on Tuesday without a consensus on how crypto regulations should be created and enforced.
The Senate Banking Committee focused on digital asset regulation and the crypto crash. Most Democrats supported tightening rules, while Republicans blamed the watchdogs for stunting innovation.
Democrats Push Strict Crypto Regulations, Republicans Blame SEC
Committee Chair Sherrod Brown (D) claimed that the cryptocurrency sector was formed to circumvent the regulations. Sen. Elizabeth Warren (D) has also maintained her longstanding view. She has hinted that those who engage in illegal activity and money laundering like cryptocurrency.
In contrast, Senator Tim Scott (R) brought the onus of the FTX collapse on SEC Chair Gary Gensler. Scott said, “To date, the SEC has failed to take any meaningful, preemptive action to ensure this type of catastrophic failure does not happen again.”
Based on the hearing, the cryptocurrency industry isn’t any closer to meaningful policy decisions predicted to be completed by the first half of 2023. Although, House Financial Services Committee members are hopeful that stablecoin legislation will soon pass.
“I think Chair Gensler’s doing a really good job,” Democratic Sen. Chris Van Hollen told Unchained.
Contrarily, Republican Sen. Bill Hagerty told the platform, “What we have in this market is opaqueness and lack of clarity.” According to Hagerty, there is a real risk that the SEC or the CFTC could conclude improper action by crypto businesses.
Last week, Rostin Behnam, the chair of the Commodities and Futures Trading Commission (CFTC), vowed to crack down on non-compliant cryptocurrency projects through enforcement in 2023. Meanwhile, SEC Chair Gensler argued that unless crypto firms abide by standards requiring full disclosure, they would not survive.
Much More Needed to Regulate Digital Assets
On Jan. 27, the White House released a statement asking Congress to “step up its efforts.” A previous Dec. hearing before the Senate Agriculture Committee had also urged Congress to swiftly enact CFTC laws.
Witness Linda Jeng, Adjunct Professor Of Law at Georgetown Institute of International Economic Law, noted her take on the regulations. Jeng underlined that it would need much more than specifying agency jurisdiction and organizing digital assets into governmental organizational structures.
Professor Yesha Yadav of Vanderbilt University Law School stated, “private exchange self-regulation forms just one part of a robust and comprehensive public regulatory framework for cryptocurrency markets.”
On the stablecoin front, an overarching regulatory bill has been up against legislative obstacles in Congress since 2022.
Witness Lee Reiners, Policy Director, Duke Financial Economics Center, noted, “I recommend Congress grants the SEC the authority to regulate stablecoins like money market mutual funds, with strict requirements that stablecoin reserves be held in cash and Treasury securities and that these reserves be subject to periodic audits and disclosure.”
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