Proposed Crypto Bill Opposed By US Watchdogs, Citing Weak Protections

Jul. 14, 2023
Proposed Crypto Bill Opposed By US Watchdogs, Citing Weak Protections

A coalition of industry watchdogs in the United States has joined forces to voice their opposition to a draft bill on the crypto market structure put forth by the United States House Financial Services Committee.

Prominent groups, including Americans for Financial Reform and the Center for Responsible Lending, wrote a detailed letter to the committee. They claimed that stakeholders in the crypto industry supported the committee’s Digital Asset Market Structure Discussion Draft bill.

However, these groups argued that the industry couldn’t provide practical uses beyond speculation. The letter was addressed to Committee Chairs McHenry and Thompson, Ranking Member Waters and Scott, Subcommittee Chairs Hill and Johnson, and Subcommittee Ranking Members Lynch and Caraveo.

Crypto Industry’s Lobbying Efforts Questioned

It expressed opposition to the discussion draft bill, citing the massive losses suffered by consumers due to the collapse of the crypto market and the billions lost directly to scams and fraud prevalent in the industry.

The letter highlighted the negative shift in public opinion regarding speculative investments and the decline in venture capital funding for this sector, which has now shifted its focus to AI.

The industry watchdogs raised concerns about the proposed bill, outlining a series of crucial issues. One major concern was the bill’s provision that would alter the SEC evaluation process, introducing “innovation” as a criterion for regulatory rulemaking.

They argued that this change would undermine the SEC’s mandate to protect investors and promote fair markets. They also criticized the bill for creating a blueprint that could allow crypto asset issuers to effectively issue “unregistered stock,” potentially exploiting retail investors.

Furthermore, the bill’s approach to decentralized networks could enable traditional financial firms to evade rigorous regulatory oversight by claiming adherence to decentralized frameworks.

The letter slams the bill’s certification scheme for crypto commodities, warning it opens the door for anyone to claim CFTC jurisdiction, endangering investors. The coalition also fears inadequate funding and resources for the CFTC and looser regulations for crypto securities.

They criticized the bill’s expansive temporary safe harbor provision, which could shelter non-compliant crypto firms from legal action and expose unsuspecting consumers to further risks.

However, they suggested that re­gulators should prioritize enforcing existing rule­s and addressing any specific gaps in regulation. This re­commended approach emphasize­s targeted actions over imple­menting extensive­ legislation to avoid potential detrime­ntal consequences for the­ crypto industry.

Related Reading | Bitcoin Unfazed By CPI Report As Resistance Holds

Ammar Raza

Associate editor
Skilled in crafting compelling content, with a deep enthusiasm for blockchain technology. I offer precise and easily comprehensible perspectives on cryptocurrencies, decentralized finance, and the ever-evolving landscape. Count on me as a reliable resource to remain informed about the latest advancements in the world of crypto.