Forbes reported today that "every" U.S. crypto exchange is being investigated by the SEC. Forbes cited to an unnamed staffer for Senator Cynthia Lumis (R-Wy) as the source of the information. The Forbes article notes that according to the crypto site, CoinGeko, there are 40 U.S. crypto exchanges. If this this statement by Senator Lumis' staffer is accurate two things are certain:
- The CFTC and Commissioner Caroline D. Pham, who issued a public statement referring to the SEC case against a former Coinbase employee as "a striking example of regulation by enforcement" are now VERY unhappy with the SEC;
- U.S. based crypto exchanges need to conduct a full scale review of their compliance policies and have a clear and defendable rationale for why the cryptocurrencies that they list are not securities.
Given the tensions between the SEC and the CFTC, it seems increasingly likely that Congressional action is the only way that burning questions of whether a particular cryptocurrency (or NFT) is a security and who will be the primary regulator of crypto will be answered. Right on cue, yesterday, U.S. Senators Debbie Stabenow (D-MI), Chairwoman of the Senate Committee on Agriculture, Nutrition, and Forestry, and ranking member John Boozman (R-AR), introduced the Digital Commodities Consumer Protection Act of 2022 (DCCPA). The DCCPA would give the CFTC new powers to regulate "digital commodities," which the DCCPA defines as cryptocurrencies including Bitcoin and Ether.
Only time will tell if the DCCPA or the Responsible Financial Innovation Act, introduced on June 7, 2022, sponsored by Senator Lummis and Senator Kirsten Gillibrand (D-NY) will ever be made into law. Until we have action by Congress it seems like the SEC and CFTC will continue to try and stake their claims as the leading U.S. crypto regulator. Just how much this uncertain regulatory turf battle will impact the growth of cryptocurrencies and related industries remains to be seen.
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