Crypto Leaders Seek Clarity from US Congress

Congress moves on a fact-finding exercise as crypto leaders demand regulatory clarity and caution against counterproductive and restrictive rules

Crypto: Pivotal Technology

The US House of Representative Financial Services Committee hearing is the first time industry leaders have the opportunity to address US lawmakers of their concerns and also address growing fears of risks that cryptocurrencies may pose to consumers and investors. 

The congressional hearing led by Representative Maxine Waters titled ‘Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States’ was hailed by observers as positive and constructive. Top crypto leaders called for greater clarity but welcomed regulations. 

“We need clear standards and the government’s support to create a new, more secure, more competitive financial system,” said Charles Cascarilla, CEO and co-founder of Paxos Trust Co. “The benefits of getting this right are enormous — but so are the consequences of getting it wrong,” adds Charles Cascarilla as he cautions against overzealous enforcement by regulators.

Source: The hearing in the House Financial Services Committee is chaired by Representative Maxine Waters 

SEC’s Approach is Distasteful

The hearing was positive as industry leaders get a rare chance to plead with the US lawmakers how the crypto industry should be governed. America like many other jurisdictions are trying to find their direction in regulating this new asset class. This is becoming increasingly important as the crypto market’s capitalization nears three trillion dollars. 

The general consensus is that regulation is inevitable. But, the regulatory framework has to be clear to facilitate growth and innovation. Coinbase, one of the main crypto exchanges in the US, is lobbying to rewrite financial regulations on crypto. New policies for digital assets must be introduced and a single agency should supervise. 

The current approach taken by the US Securities and Exchange Commission (SEC) has been frowned upon by the crypto industry in general. Former Office of the Comptroller of the Currency’s Chief, Brian Brooks described the SEC’s approach as an impediment to crypto startups. 

“What happens in the United States is you have a new crypto project and you walk into the SEC and you describe it in great detail and you ask for guidance and they say, ‘We can’t tell you,’ and you list it at your own peril,” he said.

Use Existing Framework 

One of the most forward looking solutions in the hearing was proposed by Brian Brooks. There are existing regulatory frameworks that are binding on institutions operating within a regulated space. The same framework can apply to crypto assets but the ‘fear’ of this relatively new asset class is creating additional regulatory impediments. 

Source: America needs a regulatory framework that is clear and able to facilitate innovation and protect consumers and investors

Mr. Brooks’ comments echo the same sentiments raised by the American Bankers Association. In a letter to the committee, the association believes that firms offering bank-like services should receive bank-like regulations. 

Crypto assets have different uses and play different roles. Hence, some crypto could fit within the definition of currencies and some as securities. The existing regulatory framework can apply without embarking on a massive overhaul of the entire regulatory framework.  

In short, lawmakers should stop overthinking of a solution. The need is more pressing for an immediate oversight by a recognised regulatory body if the purpose is to serve consumer and investor protection. 

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