Regulation
States, not Congress, will lead crypto regulation, legal expert says
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State financial regulators will implement crypto regulations before the U.S. Congress, Jarrod Loadholt, a partner at the Ice Miller public affairs group, told CoinDesk TV’s “First Mover.”
Rather than waiting for the federal government to codify the rules, states could adopt their own standards, such as liquidity requirements, as a condition for all cryptocurrency trading platforms to have a license to operate, said Loadholt Thursday. The federal government is more likely to regulate crypto through enforcement rather than legislation, he said.
“The reality is that this is still an evolving market and most policymakers are still trying to learn it,” Loadholt said. “But in terms of who can act faster and who can actually act faster, it will be a state regulator.”
Loadholt’s comments come after U.S. Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) proposed a crypto-friendly bill earlier this month. This bill aims to establish a regulatory framework for digital assets in the United States.
Learn more: Top US senators introduce crypto bill outlining sweeping plan for future rules
THE collapse of stablecoin terraUSD (UST) last month, as well as crypto lender Celsius Network freezing customer withdrawals this month could be one example that lawmakers use as a call to action.
In the short term, Loadholt said, there will be “a lot more action around licensing” because of the need to put in place safeguards that can address investor concerns. He suggested that in the longer term the majority of the sector could disappear, while those who can afford to comply with regulations would likely continue to operate.
“Ultimately, the industry should want to have confidence that no matter where they invest, they are safe,” he said.
Congress is unlikely to pass legislation to regulate the industry this year, Loadholt added.