October 4, 2022
TIME National Political Correspondent Molly Ball joins Yahoo Finance Live to discuss the ongoing tensions between the Securities & Exchanges Commission (SEC) and cryptocurrency regulators.
RACHELLE AKUFFO: All right, well, fraud and theft is one of the many reasons there have been calls to regulate the crypto industry. Lawmakers, lobbyists, regulators, investors all want to have a say in how the crypto market is regulated. And it’s setting up a big fight in Washington.
Molly Ball, TIME national political correspondent, joins us now to discuss. So as we look at these things, we’re looking at what’s happening with the SEC, and we are seeing the CFTC sort of jostling for position as to who is going to oversee what happens with crypto. What does this actually mean, though, for the industry, then?
MOLLY BALL: Well, it’s the industry more than anyone who is calling out for regulation at this point because they argue that they’ve been subject to these sort of arbitrary crackdowns, particularly by the SEC, but they haven’t been provided with rules of the road that would enable them to operate legitimately. And as you and your viewers certainly know, there are now so many crypto companies handling so much money and doing so much business.
And yet, there are not crypto specific regulations either that have been promulgated by regulatory agencies, such as the SEC and CFTC, or that have come from Congress to tell these agencies, here’s where we think that lines are drawn between your different turf.
And so that’s been very frustrating for an industry that, obviously, started out as this sort of cutting edge, innovative, don’t want anything to do with government type of deal, but now is very much trying to be part of the legitimate economy and legitimate financial industry in the United States. And instead, we see a lot of companies being forced offshore. And they say that this is hurting American competitiveness because they don’t have a way to operate legitimately in the American market.
DAVE BRIGGS: Questions whether it’s the SEC or the CFTC, and then yesterday comes Kim K and the massive fine that she agreed to pay with no wrongdoing admitted. What did we learn in terms of future regulation with that story that blew up around the entire internet?
MOLLY BALL: Well, this is only one in a series of actions that have been taken by the SEC, where– and some have argued– I think the industry and its allies have certainly argued that the chairman of the SEC, Gary Gensler, has been aggressively going after a lot of companies that are sort of trying to operate legitimately, rather than really targeting the less legit players, the people who really are engaged mostly in fraud.
But, you know, it really is going to fall to Congress. There’s currently several dozen bills before Congress, a few major ones offering an approach to how the industry can be regulated. The president issued an executive order back in March, which was the first ever sort of official White House attention to this issue, tasking various agencies with coming up with approaches to crypto regulation.
We saw some of those reports start to come in, in the last couple of weeks. A new one just today from one of the government agencies offering a very expansive vision for how the government might choose to regulate crypto. But I think most of the players in this agree that it is going to eventually fall to Congress. And if you know anything about Congress, that means it may not happen any time soon.
RACHELLE AKUFFO: And it’s interesting because you have regulators coming into this space, but then you also have some of these crypto companies, they’re going to think tanks. They’re going to different lobbyists, trying to get their elbows in there as well. You have FTX chief executive Sam Bankman-Fried asking for more stringent regulation.
And he says that would actually stop crypto contagion when we see things like Celsius and Three Arrows Capital blowing up in the faces of consumers. As you look at how they’re sort of overlapping into each other’s territory, how do you see that impacting regulation going forward?
MOLLY BALL: Well, I don’t know if I would characterize Sam Bankman-Fried’s perspective as wanting more stringent regulation. He has advocated very strongly for having the CFTC, the commodities regulator, oversee most of crypto, as opposed to the SEC. And some critics or crypto skeptics say that that’s because the industry wants lighter, as opposed to more stringent, regulation. The industry says that’s not the case. They just want some rules, any rules.
But there is currently this turf battle going on where the SEC sees a lot of these crypto products as securities. And so they go after what they view as violations of securities law. And then the CFTC also believes they have a role in oversight. And we’ve seen them cracking down on some DAOs recently, which sort of sent a little bit of a chill down the industry’s spine, thinking that could be the next frontier.
So they would just like for there to be rules of the road so that instead of getting in trouble on the backend, they can, on the front end, whether it’s to come in and register with the SEC or another regulator, or, in some other way, to come in to the government and then have a way to do legitimate business.
DAVE BRIGGS: You mentioned Congress does nothing fast. They do just about nothing on a bipartisan basis either. Are there political lines on crypto regulation? And when do you expect something, one thing concrete, of these– and your piece says 68 pieces of legislation.
MOLLY BALL: Yeah, so the partisanship issue is really interesting because you do have some very loud critics of crypto, particularly on the left. Senator Elizabeth Warren has been very outspoken. But it is also the case that the last administration, the Republican administration of President Trump was very hostile to cryptocurrency. And you do have a fair amount of particularly older Republican legislators who are not particularly familiar with the technology and the industry.
So it seems to be, when it comes to Congress, when it comes to the partisanship, it seems to be more of a generational issue than a partisan one. Sam Bankman-Fried, who you mentioned, has become a massive Democratic donor, putting tens, potentially hundreds of millions of dollars into the midterms and the broader political scene. So but it benefits the industry. It really benefits any industry in Washington to be seen as bipartisan or nonpartisan, to have friends on both sides of the aisle.
And that is what the crypto industry has really been busy doing over particularly the past year. Up until about a year ago, there was really very little presence in Washington for the crypto industry. That has really changed, and particularly since crypto was caught up in the infrastructure fight last fall. And now you cannot swing a dead cat in Washington without hitting a crypto lobbyist, a crypto event, a crypto discussion on a thinktank panel.
And so a lot of people are talking about it, but does that mean anything gets done? You know, I don’t make predictions, particularly about Congress. But you’re usually safe betting the over in terms of how long Congress is going to take to do something, just because the incentives are sort of stacked against it.
DAVE BRIGGS: Hammer the over, and check out “Crypto Goes to Washington” on time.com. Molly Ball, really appreciate it. Thanks.
Source: Yahoo! Finance