Regulation
Bankman-Fried Trial Exposed Crypto Fraud, But Congress Was Unwilling to Regulate the Industry
PALM SPRINGS, Calif. (AP) — The conviction of the former Cryptocurrency tycoon Sam Bankman-Fried Having stolen at least $10 billion from customers and investors is the latest black mark for the cryptocurrency industry, but in Washington there appears to be little to no interest in passing a regulation.
When cryptocurrencies collapsed and a number of companies went bankrupt last year, Congress considered several approaches to regulating the industry in the future. However, most of these efforts have come to nothing, especially in this chaotic year dominated by geopolitical tensions, inflation and the next elections of 2024.
Ironically, the failure of Bankman-Fried’s FTX and subsequent arrest late last year may have contributed to the slowing of momentum for regulation. Before FTX implosion, Bankman-Fried spent millions of dollars – it turns out it was illegally taken from its customers – to influence the cryptocurrency regulation debate in Washington and push for action.
Without Congress, federal regulators like the Securities and Exchange Commission have stepped in to take their own enforcement actions against the industry, including filing complaints against Coinbase and Binancetwo of the largest cryptocurrency exchanges.
And most recently, PayPal received a subpoena from the SEC regarding its PayPal USD stablecoin, the company said in a filing with securities authorities Wednesday. “The subpoena requests the production of documents,” the company said. “We are cooperating with the SEC in connection with this request.”
Yet Congress has yet to act.
Senators Debbie Stabenow, D-Mich., and John Boozman, R-Ark., proposed last year to entrust regulatory authority for the Bitcoin and Ether cryptocurrencies to the Commodities Futures Trading Commission. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over the CTFC.
One of the biggest stumbling blocks in the Senate has been Sen. Sherrod Brown, Democrat of Ohio, chairman of the Senate Banking Committee.
Brown has been highly skeptical of cryptocurrencies as a concept and has been generally reluctant to give them Congress’s blessing through regulation. He is detained several committee hearings on cryptocurrency issues, ranging from the negative impact on consumers to the use of currencies to finance illicit activities, but did not propose any legislation outside of his committee.
“Americans continue to lose money every day to crypto scams and frauds,” Brown said in a statement after Bankman-Fried’s sentencing. “We must crack down on abuse and cannot let the crypto industry write its own rules.”
In the House, a bill that would put regulatory guardrails around stablecoins — cryptocurrencies meant to be backed by hard assets like the U.S. dollar — passed the House Financial Services Committee this summer. But this bill received no interest from the White House and the Senate.
President Joe Biden last year signed a decree on government oversight of cryptocurrency that urges the Federal Reserve to consider whether the central bank should step in and create its own digital currency. However, so far there has been no movement on this front.
Consumer advocates are skeptical that new rules are needed.
“There is no need for special interest crypto legislation that would only legitimize an industry used by speculators, financial predators and criminals,” said Dennis Kelleher, president of Better Markets, an organization at nonprofit that strives to “build a safer financial system.” system for all Americans,” according to its website.
“Moreover, almost everything the crypto industry does is clearly covered by existing securities and commodities laws that every other law-abiding financial company in the country follows,” he said .
Bartlett Collins Naylor, financial policy advocate for Public Citizen’s Congress Watch, said “the fraud and securities laws are currently strong.”
Cryptocurrency advocates, meanwhile, are quick to note that it is Bankman-Fried who is on trial, not the entire industry.
“As the jury found, this is clearly a case of fraud committed by a small group of individuals,” said Sheila Warren, CEO of the Crypto Council for Innovation. “It is an unrelated fact that the United States needs regulatory clarity in the area of digital assets. Policymakers were focused on this reality before this trial, and will continue to be focused on it in the future. »
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Hussein reported from Lewiston, Maine