Cryptocurrency has pushed financial boundaries, and as the market expands, regulators must balance encouraging innovation and safeguarding investors. The growth of the industry has led to a lack of clear regulation, forcing businesses to interpret existing laws in various ways, increasing compliance costs and creating regulatory uncertainty.
State and federal regulators are taking a variety of approaches to regulating the space. Some are requiring businesses to register as money transmitters, while others are enforcing consumer protection laws. Some are pushing for greater federal coordination in digital asset regulation. Several bills have been introduced, including the GENIUS Act and the CLARITY Act.
The Treasury Department is working with the SEC and CFTC to develop a comprehensive framework for digital assets, and the White House has established a Crypto Task Force.
In a speech at a Practising Law Institute SEC Speaks event and congressional testimony, SEC Chair Gary Gensler indicated that some crypto intermediaries may need to be registered as securities broker-dealers. He also offered support for CFTC regulation of “non-security” tokens.
The Federal Reserve continues to ponder the merits of a central bank digital currency (CBDC). Paridon and Smith clashed on whether crypto players should be subject to banking-like regulation, and Gruenberg cautioned that a CBDC would risk giving consumers a false impression that their cryptocurrency is a government-backed security, similar to a deposit in a federally insured bank account.