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US Lawmakers Seen as Unwilling or Unable to Act Amidst Crypto Crime Crackdowns: Report

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Table of Contents

Cryptocurrency Industry Faces Setbacks, but Congressional Response Falls Short

  • Recent scandals, including Binance’s multibillion-dollar settlement and FTX founder’s conviction, highlight the cryptocurrency sector’s challenges.  
  • Despite the industry’s turmoil, US lawmakers appear unwilling to enact legislation, leaving the crypto market without a comprehensive regulatory framework.
  • Federal regulators, such as the SEC, are stepping in to fill the void, taking enforcement actions against major players, while proposed bills face obstacles and consumer advocates express skepticism.

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The cryptocurrency industry has been grappling with a series of challenges, notably underscored by the recent Binance settlement and the resignation of its CEO. These events, coupled with ongoing issues, shed light on the industry’s vulnerabilities. Despite the urgency of the situation, reports have shown that US lawmakers seem hesitant to implement necessary legislation, raising concerns about the regulatory framework’s adequacy.

Binance, one of the major players, faced a substantial multibillion-dollar settlement, amplifying the spotlight on industry malpractices. Further compounding the situation was the conviction of FTX founder Sam Bankman-Fried for financial improprieties. These scandals reverberated, causing significant financial repercussions for investors and tarnishing the overall reputation of the cryptocurrency sector.

Following the crypto market collapse last year, Congress deliberated on potential regulatory measures. However, the legislative process has been hindered by external factors such as geopolitical tensions, inflation concerns, and the impending 2024 election. Despite acknowledging the need for regulation, proposed approaches have encountered roadblocks, contributing to the industry’s continued lack of a comprehensive regulatory framework.

Also Read: SEC Accuses Kraken of Operating Unregistered Platform and Mishandling Customer Funds

Regulatory Actions and Congressional Opposition

U.S. Treasury Secretary Janet Yellen emphasized that existing regulations already apply to cryptocurrencies, citing their enforcement during the $4 billion settlement with Binance. Over 100 lawmakers have called on the Biden Administration to address crypto’s role in financing terrorism. Changpeng Zhao’s guilty plea and Binance’s admissions underscore the severity of the violations and the necessity for regulatory scrutiny.

In the absence of concrete legislative action, federal regulators, notably the Securities and Exchange Commission (SEC), have taken matters into their own hands. The SEC filed lawsuits against major cryptocurrency exchanges, including Coinbase, Binance, and Kraken. Additionally, PayPal, a significant player, faced an SEC subpoena related to its stablecoin, indicating heightened regulatory scrutiny.

Certain members of Congress have expressed opposition to the SEC’s independent actions on crypto. Senators Debbie Stabenow and John Boozman proposed an alternative approach, suggesting a transfer of regulatory authority to the Commodity Futures Trading Commission (CFTC). However, this proposal and others face challenges, including skepticism from influential figures like Sen. Sherrod Brown, chair of the Senate Banking Committee.

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Legislative Proposals, Industry Perspectives, and Future Outlook

Proposed bills aimed at regulating cryptocurrencies, including one focused on stablecoins, have been introduced. However, these initiatives have encountered a lack of interest from both the White House and the Senate. Consumer advocates remain skeptical about the necessity for new rules, questioning their effectiveness in curbing illicit activities within the crypto industry.

Dennis Kelleher, president of Better Markets, has emphasized the lawlessness within the crypto industry, stressing the urgent need for regulatory intervention. Yiannis Giokas, senior director of digital assets at Moody’s Analytics, views the Binance settlement as a watershed moment, signaling increased scrutiny. Various analysts foresee a new era for crypto development, shaped by fraud trials, settlements, and criminal charges that may influence the industry’s trajectory.

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