After 13 years, at least three market crashes, dozens of scams and Ponzi schemes, and the creation and loss of hundreds of billions of dollars, cryptocurrencies have finally garnered the full attention of Congress.
The lawmakers and lobbyists of Congress have papered Capitol Hill with proposals on how the industry should be regulated.
Sens. Debbie Stabenow (D-Michigan) and John Boozman (R-Ark), who are both members of the Senate, presented the most recent proposal from both parties on Wednesday.
It would give the Commodities Futures Trading Commission the authority to regulate cryptocurrencies like bitcoin BTCUSD, +3.15 per cent and ether ETHUSD, +6.87 per cent. The Senate Agriculture Committee, which has jurisdiction over CTFC, is chaired by Senators Stabenow and Boozman.
The idea of giving that authority to the Securities and Exchange Commission has been included in legislation proposed by both other members of Congress and consumer advocates.
During this year, cryptocurrency investors have witnessed a fall in price as well as a collapse in the value of companies, which has led to the disappearance of fortunes as well as jobs overnight.
In addition, federal regulators have accused certain businesses of operating an illegal securities exchange. Bitcoin, the most valuable digital asset, has seen its value plummet to a fraction of its all-time high, falling from more than $68,000 in November 2021 to approximately $23,000 on Wednesday.
Even though cryptocurrencies have experienced crashes in the past, the most recent one occurring in 2018, this crash is more widespread and systemic.
At the beginning of this summer, a significant hedge fund filed for bankruptcy, which led to the failure of several other cryptocurrency brokerages.
Some cryptocurrency brokers have made the misleading claim that the deposits made by their customers are protected by deposit insurance, just like deposits made at traditional financial institutions are.
Legislators, who have run out of patience with the cryptocurrency industry’s attempts to live in an unregulated Libertarian world free of banks, are now desperate to implement stringent oversight because of the industry’s behaviour.
According to a report by Public Citizen, the industry spent $9 million on lobbying fees in 2021, a figure that is certain to be higher with all of the proposals that are being considered by Congress this year.
The cryptocurrency industry would benefit from the Stabenow-Boozman legislation, as it considers the CFTC to be a more industry-friendly regulator than the SEC.
In comparison to the Securities and Exchange Commission (SEC), which had a budget of nearly $2 billion and 4,500 full-time employees, the Commodity Futures Trading Commission (CFTC) only had a budget of $304 million and approximately 666 employees last year.
According to Cory Klippsten, CEO of Swan Bitcoin, “(The cryptocurrency industry is) trying to get anyone other than the SEC to regulate them.” [Citation needed] Klippsten is a supporter of Bitcoin, but he has a healthy scepticism toward the vast majority of the wider cryptocurrency industry.
This industry has given rise to a wide variety of tokens and other coins that he considers to be nothing more than fraudulent schemes.
The cryptocurrency billionaire Sam Bankman-Fried tweeted his support for the Stabenow-Boozman bill. Bankman-Fried is known for donating millions of dollars to candidates and super PACs that lean Democratic.
During a call with reporters, Boozman stated that the CFTC is the organization that the industry would most like to see entrusted with the responsibility of regulating cryptocurrency.
“They are fairly united on this,” he said. “They all pretty much agree.”
During a press conference, Senators Stabenow and Boozman acknowledged that while they have faith that the Commodity Futures Trading Commission (CFTC) is up to the task of regulating cryptocurrencies, the agency would need support to accomplish its mission.
Futures contracts for Bitcoin and Etherium are already regulated by the CFTC. The proposed legislation seeks to address concerns regarding staffing by requiring the cryptocurrency industry to pay user fees.
These funds, in turn, would allow for the CFTC to exercise more stringent oversight over the industry. The SEC would have the authority to potentially exercise its regulatory authority over crypto-like products such as tokens or non-fungible tokens (NFTs) if this bill were to become law.
Stabenow stated that additional resources will be required if the CTFC is going to be aggressive in this area. “It is obvious that they are going to need more resources,”
Consumers are still interested in investing their money in digital assets, according to Marlon Cumberbatch, who conducts consumer research on cryptocurrency and other digital assets for the National Research Group.
This is true despite the recent market crashes. Cumberbatch made the statement that “some people believe this is the beginning of the end” for cryptocurrencies, but “we believe this is the end of the beginning” in terms of investment interest.
This year, there has been an increase in the number of legislative proposals coming out of Congress that, in a variety of different ways, aim to find solutions to the issues that have been plaguing the cryptocurrency industry.
Sen. Pat Toomey, a Republican from Pennsylvania, introduced in April a bill known as the Stablecoin TRUST Act, which would establish a regulatory framework for stablecoins.
Stablecoins have suffered massive losses so far in 2018. A stablecoin is a type of cryptocurrency that is pegged to a specific value. This value is typically based on the value of the United States dollar, another currency, or gold.
Sens. Kirsten Gillibrand (D-New York) and Cynthia Lummis (R-Wyoming) introduced a comprehensive piece of legislation known as the Responsible Financial Innovation Act in the month of June.
This bill would make a distinction between digital assets that are commodities and those that are securities, which is something that has not been done previously. It would also require the Internal Revenue Service to adopt guidance on merchant acceptance of digital assets and charitable contributions.
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The legislation that was proposed by Senators Stabenow and Boozman also has the support of Senators Cory Booker (Democrat of New Jersey) and John Thune (Republican of South Dakota).
In addition to the Toomey legislation and the Lummis-Gillibrand legislation, the House Financial Services Committee is currently working on formulating a proposal; however, negotiations regarding this proposal have become stuck.
Committee Chairwoman Maxine Waters, a Democrat from California, stated at the end of the previous month that although she, top Republican member Patrick McHenry of North Carolina, and Treasury Secretary Janet Yellen had made significant progress toward an agreement on the legislation, “we are unfortunately not there yet,” and that the three of them would continue to negotiate during the recess in August.
In November of 2017, President Joe Biden’s working group on financial markets published a report in which they urged Congress to pass legislation that would regulate stablecoins.
Additionally, President Biden issued an executive order earlier this year in which he urged a variety of agencies to investigate ways in which they can regulate digital assets.
