The conviction of former cryptocurrency mogul Sam Bankman-Fried for stealing at least $10 billion from customers and investors has highlighted the lack of regulation in the cryptocurrency industry, with Congress seemingly showing little interest in pushing through any.
When the industry experienced a collapse and a number of companies failed last year, lawmakers discussed a variety of approaches to regulate it, but these efforts have since stalled, especially during this unpredictable year of geopolitical tensions, inflation and the 2024 election.
Ironically, Bankman-Fried’s FTX implosion and his subsequent arrest late last year may have been a contributing factor to the lack of momentum for regulation. Prior to the collapse, Bankman-Fried had illegally spent millions of dollars in order to shape the discussion around cryptocurrency regulation in Washington and push for action.
In the absence of Congress, federal regulators such as the Securities and Exchange Commission (SEC) have intervened, filing lawsuits against Coinbase and Binance, two of the biggest cryptocurrency exchanges. Furthermore, the SEC recently issued a subpoena to PayPal regarding its PayPal USD stablecoin.
However, Congress has yet to act, with the proposed bill by Sens. Debbie Stabenow and John Boozman to transfer the regulatory authority over cryptocurrencies to the Commodity Futures Trading Commission (CTFC) not getting any traction.
One major blockage is Sen. Sherrod Brown, chair of the Senate Banking Committee, who has been highly sceptical of cryptocurrencies and has been reluctant to back them through regulation. Brown has held several hearings on cryptocurrency issues, but no legislation has been passed out of his committee.
In the House, the bill to establish regulatory guardrails around stablecoins has passed out of the House Financial Services Committee, but has not been taken up by the White House or the Senate. President Joe Biden did sign an executive order last year to investigate if the Federal Reserve should create its own digital currency, but there has been no development on this.
Consumer advocates have expressed that there is no need for any special interest crypto legislation, as existing laws on fraud and securities are sound. Cryptocurrency advocates, however, point out that it was Bankman-Fried who was on trial, rather than the entire industry.
Overall, the conviction of Bankman-Fried has highlighted the lack of regulation in the cryptocurrency industry, and the need for greater oversight and guardrails.
