As Congress prepares for a historic joint hearing on creating new, fit-for-purpose rules for the digital currency industry, an ongoing regulatory campaign has raised concerns about the future of this fast-growing sector. Marco Santori, Chief Legal Officer at Kraken and a leading legal expert on blockchain and cryptocurrency, provided insight into the need for clear and consistent regulations to foster innovation and protect investors.
The CLO asks Kraken for balanced cryptocurrency regulations
at recent days tweetSantori highlighted the “indefensible” situation in the United States, noting that other countries are moving forward with clear and consistent regulations that enable innovation while protecting consumers. He stressed the need for US regulators to take a more proactive approach to cryptocurrencies, and to create a regulatory framework that is adaptable to the ever-changing nature of the industry.
1/ Tomorrow Congress will hold a historic joint hearing between the Financial Services and Agriculture Committees on creating new, fit-for-purpose rules for cryptocurrency.
I will testify live.
– Marco Santori (@msantoriESQ) May 9, 2023
Santori’s advocacy of new laws differs significantly from his earlier position. As a longtime advocate of self-regulation within the industry, he had never before advocated for new laws. However, he believes that the current regulatory environment in the United States is hindering the growth of the industry and putting American companies at a disadvantage compared to their international counterparts.
Santori suggests that adopting a more collaborative approach is one way to improve how regulators interact with cryptocurrencies. Rather than viewing regulators as adversaries, he believes greater engagement between regulators and industry can lead to better outcomes for all involved. This includes developing clearer compliance guidelines, educating regulators on unique aspects of the industry, and promoting innovation through responsible regulation.
Additionally, Santori noted that the current “endless litigation” environment is detrimental to companies like Kraken and failing to protect consumers. The lack of clear and consistent regulations can make it difficult to plan ahead, invest, staff, or allocate time effectively.
Santori believes Congress is important in improving the regulatory environment for the cryptocurrency industry. By providing regulators with the tools and resources they need to effectively oversee the industry, Congress can help foster innovation while ensuring that consumers are protected.
Former CFTC chairman to testify at a congressional hearing
Former CFTC Chairman Timothy Massad is scheduled to testify before Congress tomorrow on the need to strengthen regulation of digital assets. in his willingness statementMassad highlighted the gap in spot market regulation in cryptocurrencies that are not securities, such as Bitcoin. He stressed that this gap still exists and is complicated by the controversy surrounding the classification of digital assets.
Massad urged Congress to fix this gap, stating that there are two basic paths to follow. He believes only one way is best and will explain that in his testimony tomorrow.
Massad also highlighted the lack of clarity in the rules for resolving the issue of whether digital assets are securities or commodities. The trading and lending platforms claim to only deal in tokens that are not securities, thus avoiding direct federal oversight.
As a result, investor protection on cryptocurrency trading and lending platforms is insufficient. The failures of FTX trading platform, cryptocurrency lender Celsius, Terra/Luna stablecoin, and others in the past year have left hundreds of thousands of investors with losses.
The joint hearing is important in the ongoing efforts to create a clear and consistent regulatory framework for the cryptocurrency industry. The insights and recommendations that Santori and Massad provide will be closely watched by industry participants and policymakers alike, and are expected to significantly influence future regulatory decisions.
Featured image from Unsplash, chart from TradingView.com