Creation of Regulatory Framework for Crypto in U.S. Stuck

The chair of the Commodity Futures Trading Commission (CFTC) said that the agency can’t control the crypto market without legislative changes. But the development of a regulatory framework for digital assets in the U.S. stalled. Meanwhile, the president of the Federal Reserve Bank of Minneapolis argues that crypto shouldn’t be regulated but banned since it’s only used for illegal activities.

Speaking at the annual Securities Industry and Financial Markets Association (SIFMA) meeting in New York, CFTC Chair Rostin Behnam stated that the agency is facing serious challenges due to delays in developing legal regulations for the crypto industry.

According to Behnam, without appropriate legislation in place, the agency is “handcuffed,” leaving investors and crypto users in the country vulnerable. “Efforts to adopt a legislative framework regulating the digital asset industry have stalled out so far,” Behnam said, pointing out that the lack of regulation is hampering institutional investors and holding back the integration of technology into traditional finance.

Kenneth Bentsen, President of SIFMA, also voiced dissatisfaction with the current situation, stressing that there’s growing frustration in the financial industry over the lack of clarity in enforcement issues. He added that brokerage firms are avoiding digital assets out of fear of facing existing regulatory enforcement actions.

Both Behnam and Bentsen expressed hope that the upcoming elections might change the situation, enabling a new Congress and president to speed up the implementation of necessary regulations. A potential victory of the Republicans in the U.S. elections could boost investments in cryptocurrencies. According to CoinShares, investment products based on digital assets received $2.2 billion last week.

However, not all U.S. officials believe that the crypto market needs regulation. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said that cryptocurrency fuels criminal activity, complicates financial oversight, and digital assets will never become part of the financial system. In his opinion, cryptocurrencies should be banned, not regulated. Kashkari backed his comments with a report from the Federal Reserve Bank of Minneapolis, in which analysts claim that Bitcoin and other cryptocurrencies should either be taxed or banned to maintain the country’s deficit.

Kashkari went on to state that Bitcoin doesn’t serve as a medium of exchange or a store of value like traditional currency, is primarily used for illegal activity, and has no fundamental value. However, statistics contradict the official’s words. According to Chainalysis, only 0.34% of all crypto transactions in 2023 were linked to any illicit activity.

U.S. officials are highly interested in regulating the cryptocurrency market, paying special attention to the stablecoin sector, whose role in strengthening the financial system is recognized even by the Fed.

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