By FATIMA HUSSEIN and KEN SWEET – Associated Press
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 are finally getting the full attention of Congress, whose lawmakers and lobbyists have lined Capitol Hill with proposals on how to regulate the industry.
The latest bipartisan proposal came Wednesday from Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark. This would give regulatory authority over 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 members of Congress and consumer rights advocates have suggested giving power to the Securities and Exchange Commission.
This year, crypto investors have seen prices plunge and businesses collapse with fortunes and jobs disappearing overnight, and some companies have been accused by federal regulators of running an illegal stock exchange. Bitcoin, the largest digital asset, is trading at a fraction of its all-time high, dropping from over $68,000 in November 2021 to around $23,000 on Wednesday.
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While cryptocurrencies have had crashes before, most recently in 2018, this crash was broader and more systemic. A major hedge fund filed for bankruptcy earlier this summer, which also caused the collapse of other cryptocurrency brokers. Some crypto brokers have falsely claimed that their clients’ deposits are covered by deposit insurance, like banks are.
Lawmakers, who have lost patience with the cryptocurrency industry’s attempts to live in an unregulated, bankless, libertarian world, are now desperate to implement strict oversight. The industry spent $9 million in 2021 on lobbying fees, according to a report by Public Citizen, a figure that is sure to be higher with any proposals from Congress this year.
The Stabenow-Boozman bill would be a victory for the cryptocurrency industry, which views the CFTC as a more industry-friendly regulator than the SEC. The CFTC, which last year had a budget of $304 million with about 666 employees, 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 Swan Bitcoin CEO Cory Klippsten. Although he champions Bitcoin, Klippsten is deeply skeptical of much of the broader crypto industry, which has produced myriad tokens and other coins that he views as nothing. more than scams.
Cryptocurrency billionaire Sam Bankman-Fried, who has donated millions of dollars to mostly Democratic candidates and super PACs, tweeted his support for the Stabenow-Boozman bill.
Boozman, on a call with reporters, said the industry’s preferred choice to regulate crypto is the CFTC.
“They’re pretty united on that,” he said.
At a press conference, both Stabenow and Boozman acknowledged that while they believe 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 issues by imposing user fees on the crypto industry. These funds would in turn fund more robust oversight of the industry by the CFTC. The bill would leave crypto-like products, like tokens or non-fungible tokens (NFTs), to the SEC to potentially assert its regulatory authority.
“Obviously, if the CTFC is 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 think it’s the beginning of the end” for crypto, Cumberbatch said, “but we think it’s the end of the beginning” in terms of investment interest.
There has been a growing list of Congressional proposals this year that attempt in different ways to address issues in the cryptocurrency industry. Sen. Pat Toomey, R-Pa., introduced legislation in April, called the Stablecoin TRUST Act, that would create a framework to regulate stablecoins, which have suffered massive losses this year. Stablecoins are a type of cryptocurrency tied to a specific value, usually the US dollar, another currency, or gold.
In June, the senses. Kirsten Gillibrand, DN.Y., and Cynthia Lummis, R-Wyo., have proposed a sweeping bill called the Responsible Financial Innovation Act. This bill proposed legal definitions of digital assets and virtual currencies; require the IRS to adopt guidelines on merchant acceptance of digital assets and charitable contributions; and would distinguish between digital assets that are commodities and those that are securities, which has not been done.
The senses. 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 worked on in the House Financial Services Committee, although those negotiations have stalled.
Committee chair Maxine Waters, D-California, said last month that while she, senior Republican member Patrick McHenry of North Carolina, and Treasury Secretary Janet Yellen had made significant progress toward agreement on the legislation, “Unfortunately, we are not there yet, and will therefore continue our negotiations during the August holidays.
President Joe Biden’s Financial Markets Task Force last November released a report calling on Congress to pass legislation that would regulate stablecoins, and Biden earlier this year issued an executive order calling on various agencies to seek ways to regulate digital assets.
Follow AP’s coverage of the cryptocurrency industry at https://apnews.com/hub/cryptocurrency.
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