New cryptocurrency oversight legislation comes as the industry shakes

WASHINGTON (AP) – After 13 years, at least three crashes, dozens of scams and Ponzi schemes and hundreds of billions of dollars made and evaporated, cryptocurrencies finally have the full attention of Congress, whose legislators and lobbyists have plastered Capitol Hill with proposals on how to regulate the sector.

The latest bipartisan proposal arrived on Wednesday from Sens. Debbie Stabenow, D-Mich., And John Boozman, R-Ark. It would pass regulatory authority on Bitcoin and Ether to the Commodities Futures Trading Commission. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over the CTFC.

Bills proposed by other congressmen and consumer advocates have suggested giving authority to the Securities and Exchange Commission.

This year, cryptocurrency investors have seen prices plummet and companies plummet with fortunes and jobs disappearing overnight, and some companies have been accused by federal regulators of operating an illegal stock exchange. Bitcointhe largest digital asset, it is trading at a fraction of its all-time high, down from more than $ 68,000 in November 2021 to around $ 23,000 on Wednesday.

While cryptocurrencies have had crashes previously, most recently in 2018, this crash has been broader and more systematic. A major hedge fund filed for bankruptcy earlier this summer, which in turn caused other cryptocurrency brokers to collapse also. Some cryptocurrency brokers have falsely claimed that their clients’ deposits are backed by deposit insurance, such as banks.

Lawmakers, who have run out of patience With the cryptocurrency industry’s attempts to experience an unregulated, bankless libertarian world, they are now desperate to implement rigorous oversight. The industry spent $ 9 million in 2021 on lobbying commissions, according to a Public Citizen reporta figure that will certainly be higher with all the proposals of the Congress this year.

The Stabenow-Boozman bill would be a win for the cryptocurrency industry, which sees the CFTC as a more industry-friendly regulator than the SEC. The CFTC, which had a budget of $ 304 million with approximately 666 employees last year, is a fraction of the size of the SEC, which had a budget of nearly $ 2 billion and 4,500 full-time employees.

“(The cryptocurrency industry is) trying to get anyone other than the SEC to regulate them,” said Cory Klippsten, CEO of Swan Bitcoin. Although he is a Bitcoin supporter, Klippsten is deeply skeptical of much of the broader crypto industry, which has produced a myriad of tokens and other coins that he regards as nothing more than scams.

Cryptocurrency billionaire Sam Bankman-Fried, who has donated millions of dollars to mostly Democratic and super PAC candidates, tweeted his support for the Stabenow-Boozman bill.

Boozman, in a phone call with reporters, said that the industry’s preferred choice for regulating cryptocurrencies is the CFTC.

“They’re pretty united on that,” he said.

In a press conference, Stabenow and Boozman both acknowledged that while they trust the CFTC is up to the task of regulating cryptocurrencies, the agency would need support. The CFTC already oversees futures contracts for Bitcoin and Etherium, and the bill attempts to alleviate staffing concerns by imposing user fees on the cryptocurrency industry. Such funds, in turn, would finance stronger oversight of the industry by the CFTC. The bill would leave cryptocurrency-like products, such as tokens or non-fungible tokens (NFTs), for the SEC to potentially assert its regulator.

“Obviously if the CTFC wants to move aggressively in this area, it will need more resources,” Stabenow said.

Marlon Cumberbatch, who conducts consumer research on cryptocurrency and other digital assets for the National Research Group, says that despite the crashes, consumers are still interested in investing their money in digital assets. “Some people believe this is the beginning of the end” for cryptocurrencies, Cumberbatch said, “but we believe this is the end of the beginning” in terms of investment interest.

There has been a growing list of proposals out of Congress this year that in various ways are trying to address the problems in the cryptocurrency industry. Senator Pat Toomey, R-Pa., Introduced legislation in April, called the Stablecoin TRUST Act, that would create a framework to regulate stablecoins, which have suffered huge losses this year. Stablecoins are a type of cryptocurrency pegged to a specific value, usually the US dollar, another currency, or gold.

In June, the sens. Kirsten Gillibrand, DN.Y., and Cynthia Lummis, R-Wyo., Proposed a far-reaching bill called the Responsible Financial Innovation Act. That bill proposed legal definitions of digital assets and virtual currencies; would require the IRS to adopt guidelines on merchant acceptance of digital assets and charitable contributions; and it would make a distinction between digital assets that are commodities and those that are titles, which was not done.

Sens. Cory Booker, DN.J., and John Thune, RS.D., are also co-sponsors of the Stabenow-Boozman bill. Along with the Toomey legislation and the Lummis-Gillibrand legislation, a proposal is being drawn up in the House Financial Services Commission, although those negotiations have stalled.

Committee chairman Maxine Waters, D-Calif., Said last month that while she, North Carolina principal Republican member Patrick McHenry and Treasury Secretary Janet Yellen he had made considerable progress towards an agreement on the legislation, “unfortunately we are not there yet and therefore we will continue our negotiations during the August break”.

President Joe Biden’s Financial Markets Working Group last November released a report asking Congress to pass legislation that would regulate stablecoins.and Biden issued an executive order earlier this year inviting a variety of agencies to look for ways to regulate digital assets.

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Follow AP’s coverage of the cryptocurrency industry at https://apnews.com/hub/cryptocurrency.

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