Sen. Elizabeth Warren has urged the Securities and Exchange Commission (SEC) to increase its regulatory efforts in the crypto market. During a speech at a virtual forum for the American Economic Liberties Project on Wednesday, Warren said that the SEC has already made progress in regulating the crypto industry, but more needs to be done. Crypto industry experts say Warren’s proposed crypto market regulations are ill-informed, however, and would do more harm than good.
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“The SEC has the right rules and the right experience, and SEC Chair Gary Gensler is the right leader to ensure that crypto adheres to longstanding security laws that protect investors,” Warren said. “But the SEC needs to do even more and use the full force of its regulatory powers across the entire crypto market.”
Warren previously called on the SEC to “suit up” and take a hardline approach to crypto fraud in December. Gensler has responded to Warren’s call, stating in an interview with Yahoo Finance, “We’re already suited up.”
The SEC filed 760 enforcement cases in its fiscal year 2022, with 30 of those cases involving crypto. This number does not include the two new suits against crypto firms that have been filed this year.
Criticism of Warren’s Crypto Market Regulation Calls
Some criticized Warren’s proposed crypto regulations as illogical and overreaching, including Kadan Stadelmann, CTO of Komodo. Stadelmann published an open letter on January 25 criticizing Warren’s approach as “dangerous” for innovation in the United States, among other things.
Stadelmann specifically takes issue with Warren’s proposed bill, which would require the U.S. Treasury Secretary to create a rule disallowing financial institutions from transacting with self-custody wallets, citing the recent implosion of crypto exchange FTX as justification.
However, Stadelmann argues that this approach is misguided, as it would strip consumers of the only effective protection against the failure of third-party intermediaries like FTX. He points to the Keep Your Coins Act, introduced by Rep. Warren Davidson (R-OH) last February, which would protect Americans’ right to self-custody of their digital assets and conduct peer-to-peer transactions without intermediaries.
This bill seeks to protect individuals’ right to act as their own custodian and engage in peer-to-peer transactions without the need for third-party intermediaries, like FTX. The bill would prevent any federal agency from implementing a rule that could handicap or inhibit people’s ability to do so.
“As the federal government seeks more regulation of the crypto ecosystem, it seeks to impose more surveillance over American citizens,” said Rep. Davidson upon putting the bill foward. “It’s vital that we preserve the attributes of cash transactions by protecting the permissionless nature of cash. No third party should be required for two people (or companies) to use money as a means of exchange, store of value, and record of account. This bill ensures that individuals will always have the ability to transact without any intermediaries.”
Stadelmann also criticized Warren’s crypto market regulation suggestion to prevent people from owning Bitcoin in their retirement accounts, arguing that this would take away people’s choice and does not address the underlying issues that led to the collapse of FTX.
Stadelmann suggests that instead of trying to impose more surveillance, the government should focus on preserving the permissionless nature of crypto transactions and protecting the ability of people to transact without intermediaries.
“During the 2008 financial crisis, you were viewed as a champion of the people against the banking system, against the Wells Fargos, against the Chases, against the HSBCs of the world,” he wrote. “Bitcoin and other cryptocurrencies are a solution to the banking oligopolies’ predatory ways. It’s one way for people to exit the banking system, take custody of their own money, and not worry about fees and banks taking advantage of them.”
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