Biden administration calls on Congress to speed up crypto rules

The Biden administration has urged Congress to pass new legislation to clarify how cryptocurrencies should be regulated, as officials warn delays on Capitol Hill could put investors at risk.

The US Financial Stability Oversight Council — a group of the country’s top financial regulators, which includes the Treasury Department — issued a report Monday urging politicians to unite on a number of different areas, including Bitcoin’s regulation and other crypto assets that are sold on the US Dollar spot market.

The report comes as members of Congress debate new proposals covering everything from the $140 billion stablecoin industry to tax rules for crypto brokers. But while Biden administration officials worry about a renewed collapse of the now-infamous stablecoin TerraUSD, those close to the congressional negotiations say they are months away from passing new legislation.

FSOC’s report also comes as the crypto industry is rocked by a historic price drop that has seen several prominent companies go bankrupt, raising questions about who should exercise primary oversight over volatile crypto markets.

Regulators like the Securities and Exchange Commission and the Commodity Futures Trading Commission continue to push for jurisdiction over the industry. SEC Chairman Gary Gensler has argued that most cryptocurrencies – and the platforms on which they are traded – should be regulated by the SEC since many of the tokens are considered securities under US law.

A Treasury Department official said the report’s authors — who include Gensler and Rostin Behnam, the CFTC chairman — did not intend to favor one agency over another.

The report warned that many cryptoasset activities lack “basic risk controls to protect against running risks or to ensure leverage is not excessive, and prices have repeatedly posted significant and broad declines.”

FSOC’s report also suggests cross-agency collaboration to close existing loopholes that allow crypto-asset companies to find the most favorable regulation for their business.

“Some crypto-asset companies may have subsidiaries or affiliates that operate under different regulatory frameworks, and no single regulator may have visibility into the risks of the entire company.”

To that end, FSOC recommended that Congress pass rules that would give federal market regulators the power to enact rules for crypto-asset markets that are not covered by existing U.S. securities laws.

Rules should cover conflicts of interest, abusive trading practices, segregation of client assets, cyber security and record keeping.

The council’s report also calls on Congress to pass legislation to give regulators visibility into crypto platform subsidiaries and create a federal framework for stablecoin issuers.

The group of regulators added that while traditional finance’s exposure to crypto activity is limited, it could be “expanding rapidly.” Stablecoin activity, leveraged trading, and wealth custody are cited as examples of a potential entanglement between traditional finance and crypto. This summer, crypto exchange Coinbase inked a deal with wealth management giant BlackRock to give its clients easier access to crypto. Biden administration calls on Congress to speed up crypto rules

Adam Bradshaw

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