Timothy G. Massad who was the Chairman of the United States Commodities and Futures Trading Commission (CFTC) during the Obama has authored a lengthy report that focuses on the need to introduce better regulations that govern crypto assets like bitcoin (BTC) and ethereum (ETH).
Massad who wrote as a senior fellow of Harvard University explained that there is a gap in the cryptocurrency laws that lawmakers need to address. In the summary of his report titled “It’s Time to Strengthen the Regulation of Crypto-Assets”, Massad wrote:
“The gap [in the regulation of crypto-assets] is contributing to fraud and weak investor protection in the distribution and trading of crypto-assets.” Adding that
“Congress needs to fix this by creating regulatory oversight of the cash market for crypto-assets, and the trading platforms and other intermediaries that operate in that market.”
The Gap Between Cryptocurrency Regulation in the U.S.
The US is one of the many countries which do not have an elaborate regulation for cryptocurrencies and cryptocurrency operators.
Massad, in his paper, explained that the existing regulations fell between the CFTC and the Securities and Exchange Commission (SEC) but neither has sufficient jurisdiction. He noted there still areas that neither of the agencies currently covers which need to be plugged.
The SEC has jurisdiction over crypto-assets deemed securities, but many crypto-assets—including the most widely traded ones such as Bitcoin—are not securities…The CFTC declared Bitcoin and other virtual currencies commodities, but that does not solve the problem. Derivatives based on crypto-assets are subject to CFTC regulation—such as Bitcoin futures and swaps—as are the platforms that trade such derivatives.
“…the CFTC has only very limited jurisdiction of the underlying cash market for such crypto-assets—for example, the buying and selling of Bitcoin. That is where most of the activity is today.”
He advised against creating a new agency to regulate cryptocurrencies noting that “either the SEC or the CFTC is competent to regulate this area if given the power.” He said he favored the SEC to be the lead agency in crypto regulation while arguing that regulation should be at the federal level and not to defer to State laws.
Benefits of a Better Regulation
Governments who have sought to regulate the crypto industry has cited concerns about investor risk, money laundering and terrorism financing as reasons to pursue strict control of the space.
Mossad believes that better regulation will benefit crypto investors, further the development of new technologies, curtail the use of crypto-assets used for illicit payments, and reduce the risk of cyber-attacks.
Japan Adds New Cryptocurrency Regulation
Japan is the leading country in terms of cryptocurrency regulation. The country became the first to welcome crypto-based businesses with comprehensive regulations championed by its Financial Service Agency (FSA).
As Smartereum reported, the country’s executive council approved guidelines that tighten the cryptocurrency regulation in the country. The guideline extended crypto regulations to cryptocurrency margin trading, an area that used to be a regulatory lacuna. According to local reports, the new cryptocurrency margin trading limits which are similar standard foreign exchange trading limits became imperative as margin trades became 11 times more than regular cash trades.
Industry Calls for Clear Regulations in the US
In the United States, a number of crypto figures have called for clarity in the crypto regulations one of which is Jeremy Allaire, the co-founder and CEO of crypto finance company Circle. At the beginning of this year, Allaire wrote:
“The biggest and most immediate regulatory hurdle we face is the lack of specific guidance from the SEC on how to classify various crypto assets.” Adding that “this can unlock a lot of market activity, and also clearly enable the growth of a market for crypto-based securities.”