Former Chairman of the U.S. Commodity Futures Trading Commission (CFTC), Timothy Massad, believes that the crypto industry needs a more thorough regulation.
In a 58 pages long paper entitled “It’s time to strengthen the regulation of crypto-assets,” Massad explains his approach. He argues that the crypto realm needs a different type of regulation. Specifically, he believes that it should be stronger and more advanced. He emphasizes that the hype around BTC distracted the regulators. And yet BTC and other crypto assets have not reduced reliance on centralized financial institutions. Instead, they created a new realm which is left unregulated. As a result, investors partaking in it are subject to fraud and weak regulation.
“Better regulation will benefit crypto investors, further the development of new technologies, curtail the use of crypto-assets used for illicit payments, and reduce the risk of cyber attacks, which can result in collateral damage elsewhere in our financial system.”
Massad emphasizes that neither the Security and Exchange Commission (SEC) or the CFTC have sufficient oversight over crypto. While he mentions the SEC’s stance that BTC and the like are not securities, he deems this to be problematic. The CFTC which declared BTC a commodity lack sufficient jurisdiction of the underlying cash market for such crypto-assets. This includes buying and selling BTC.
Who should take care of crypto?
Massad suggests fixing these issues. He believes that Congress should create a regulatory framework for the cash market for crypto-assets. It should also regulate the existing trading platforms and other types of intermediaries present on the market. He believed that the SEC can take care of the matter and mentions the Financial Stability Oversight Council (FSOC). The latter, according to him, might take lead in articulating a path forward for the regulation of crypto-assets.
He does add that the Financial Stability Oversight Council (FSOC) might take lead in articulating a path forward for the regulation of crypto-assets.
“The FSOC is well-suited to the task, and its involvement could draw bipartisan support. Many Re- publicans have been critical of FSOC because of its power to designate firms as systemically important, but it isn’t exercising that power today.”
While some crypto enthusiasts might dislike Massad’s proposal, the American crypto regulatory scene does need more clarity. The SEC, for example, is still reviewing the VanEck/SolidX ETF application. Concurrently, it does not clarify whether Ripple is a security and does not provide comprehensive reasons for rejecting ETF applications.
Many institutional investors see this as a problem. For example, Jeremy Allaire, CEO of Circle, emphasized that lack of clarity from the SEC is a big hurdle for the industry. And called for global crypto rules. However, it seems that the tide is turning. In a recent speech, Valerie Szczepanik, the SEC’s senior advisor for digital assets, promised that crypto spring is coming soon. And added that it will require more regulation.