There’s a plan to regulate crypto and stablecoins. Here’s what you need to know : NPR

There is broad agreement that some regulation is needed, but who should do it is up for debate.

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Chris McGrath / Getty Images

There is broad agreement that some regulation is needed, but who should do it is up for debate.

Chris McGrath / Getty Images

Things are changing rapidly in the world of cryptography.

Prices plummeted in November, followed by a downturn. In just a couple of weeks in May, cryptocurrencies lost more than half a trillion dollars in market value.

The most spectacular implosion was a cryptocurrency called TerraUSD. It was a stable currency, meaning that its value was assumed to be pegged to the US dollar using a complicated algorithm.

On the contrary, it has fallen and is now worthless.

That crash has revived calls for new rules to govern a cryptocurrency market that is still a kind of wild frontier. And now perhaps we have the biggest step towards a new cryptographic regulation.

Two senators, a Republican and a Democrat, have teamed up to introduce a new regulatory bill last week. But skeptics warn that it is a step backwards and too friendly with cryptocurrencies.

We decompress what is happening and why it is a big question WHO would regulate crypto.

What is the current setting?

Almost everyone believes that the crypto industry needs some kind of regulation.

New cryptocurrencies are born for hours, and with them, many scams and frauds. The industry is currently overseen by a mosaic of federal and state regulations, which have not always evolved as fast as technology.

The Securities and Exchange Commission (SEC) has carried out dozens of enforcement actions related to cryptography in recent years. So did the Commodity Futures Trading Commission (CFTC).

Following the May collapse, Treasury Secretary Janet Yellen called on Congress to pass “comprehensive” regulations on stable currencies in particular.

Democratic Sen. Kirsten Gilibrand of New York says this phase of the evolution of the Internet, with cryptocurrencies and other technologies collectively known as Web 3 – presents similar risks in the early days of social media – sometimes called Web 2.

“Congress could not regulate Web 2“We have failed to create a regulatory agency on various platforms that are now doing extreme damage to our youth and dividing this country.” We will not make the same mistake Web 3. “

So what is this new bill?

It was introduced earlier this month by Senator Gillibrand and Senator Cynthia Lummis, a Republican from Wyoming.

It establishes a framework for regulating the cryptographic industry.

This includes tax requirements for various digital assets and stricter requirements for stable currencies, which, according to Gillibrand, would not allow the TerraUSD currency to implode in May.

It also has provisions on cybersecurity, the possible creation of a self-regulatory organization, and some disclosure requirements. And it includes provisions directing the Federal Energy Regulatory Commission to study the energy impact of the cryptocurrency industry.

El Salvador is mining cryptocurrency with 300 computers at a plant fed by the Tecapa volcano.

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Alex Peña / Getty Images

El Salvador is mining cryptocurrency with 300 computers at a plant fed by the Tecapa volcano.

Alex Peña / Getty Images

But perhaps most importantly, what worries skeptics the most is that the bill defines most cryptocurrencies as goodswhich would be overseen by the Commodity Futures Trading Commission (CFTC), instead valueswhich would fall to the much larger Securities and Exchange Commission (SEC).

The SEC is led by Gary Gensler, one of the sharpest crypto critics, who said the crypto industry is “full of scams, scams and abuses.” He strengthened the SEC’s cryptography enforcement team in early May and, after the cryptography crash, asked Congress for more funding, saying the team was still “unstaffed.”

But Senator Gillibrand said it made sense for the CFTC to do the heavy work.

“It would be inappropriate for the SEC to regulate some of these markets because they don’t function as securities,” he said. President Gensler has already said … the words that “Bitcoin is a commodity” because he understands that it is a form of value just as gold is a form of value, just as oil is a form of value. which is more appropriately located under the CFTC “.

Both senators are optimistic about the future of the crypto. Lummis bought his first Bitcoin in 2013 and was worth more than $ 100,000 in his latest financial disclosure. She said this bill has tried to find the “sweet spot” when it comes to regulation.

“So people who are innovating in this space know the traffic rules and people who are consuming the final products know that the elements of consumer protection are there,” Lummis said.

The bill is still a long way from becoming law. As for the timing for a full vote, Lummis said, “We’ve been talking for months.” She previously acknowledged that the general bill may eventually be split into parts to go through the relevant committees.

What critics say

There are a number of technology and finance experts who say that cryptocurrency is a purely speculative asset and that it is useless.

And this month, a group of them wrote a letter to congressional leaders asking them to “ensure that US individuals do not exist.”

One of the signatories was Molly White, a software engineer who runs the blog Web3 is doing great, which documents cases of fraud and catastrophe in the cryptographic universe. And he’s not a fan of the new bill.

“It’s very much what I think the cryptocurrency industry expected to see from regulators, which is a very limited set of regulations applied to the industry,” he said.

Some in the industry have responded positively so far. The Crypto Council for Innovation called it a major step forward and the Blockchain Association called it a “milestone.”

One of the biggest problems White has with the legislation is precisely that he hands over most of the regulatory power to the CFTC instead of the SEC.

White says cryptocurrencies are not like traditional products like wheat or oil, so the CFTC should not be the main regulator muscle.

“Cryptocurrencies are more like securities because people generally invest money in them waiting for a return on their investment,” White said. “And when someone commits to something like investing, that’s a good sign that they should go to the SEC.”

In addition, White said the CFTC was simply not equipped to handle the workload, although the bill would allow the CFTC to impose a fee on digital asset exchanges to help fund its large role.

“There would have to be a significant change in the amount of resources that go to the CFTC for them to suddenly take on this huge and much broader set of issues than they have dealt with in the past,” he said. “And the SEC, frankly, already has more experience in this field.”

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