The crypto market is continuing to feel the aftershocks of the collapse of FTX. Although the contagion hasn't spread into mainstream financial markets, policymakers fear that it could and are proposing regulatory intervention. In the U.S., U.K. and E.U. there are several global regulatory irons in the fire, and a new found impetus to wield them for the protection of markets and consumers. Whether these irons will be forged quickly and thoughtfully only time will tell.
U.S.
In the U.S., we will likely see a continued and strengthened differentiation between different categories of digital assets. The Biden Administration's executive order (EO) on "cryptoassets" published in March made it clear that crypto is "here to stay," with many federal agencies publishing subsequent detailed responses. Although a relief for many in the crypto industry, the executive order still left the door open for more detailed policy proposals to be brought up. Most notably, the Digital Commodities Consumer Protection Act (DCCPA), the bill championed by none other than Sam Bankman-Fried, remains in progress. While the DCCPA has run into some recent opposition for granting the Commodity Futures Trading Commission (CFTC) broad oversight over the spot crypto markets (instead of the U.S. Securities and Exchange Commission), it will still be a key baseline for debate in the new Congress. The bill is currently backed by Senate Agriculture Committee Chairwoman Sen. Debbie Stabenow (D-Mich.) and ranking member Sen. John Boozman (R-Ark.). Moreover, noteworthy crypto skeptic and chair of the Senate Banking Committee, Sen. Sherrod Brown (D-Ohio) recently sent U.S. Treasury Secretary Janet Yellen a letter expressing, for the first time, his willingness to work on crypto legislation. We could finally see bipartisan agreement for rules governing stablecoins and bank involvement in crypto.
U.K.
In the U.K., although mired with its own political problems during 2022, the ambition set in April to be a crypto hub seems to be holding. Current U.K. Economic Secretary Andrew Griffith reiterated the country's commitment to becoming a key center for the nascent industry, saying the collapse of FTX isn't a reason to change course. With the Financial Services and Markets Bill (FSMB) making its way through Parliament, the Financial Conduct Authority (FCA) is poised to take on broad new powers to regulate crypto markets. However, firms hoping for a forward leaning approach from the regulator will likely be disheartened by incoming FCA Chair Ashley Alder's recent remarks about crypto exchanges facilitating money laundering and creating "massively untoward risk." The regulator might have its own ideas on how to exercise any new powers it receives once the FSMB is passed into law.
E.U.
In Europe, hopes continue to be pinned on MiCA, or the Markets in Crypto-Assets bill, a comprehensive piece of legislation that would apply to the 27-member nation trading bloc. Initial plans for the European Parliament to vote on the bill in December were abandoned given its length and complexity, with reports suggesting the vote, initially scheduled for February, have been delayed until April due to translation issues. MiCA may face pressure to be "FTX-proof," potentially resulting in even further delays – but the European Commission has been bullish on this front, claiming that under MiCA as currently drafted the failings of FTX wouldn't have been allowed to happen. Even if true, this legislation is still a long way from being enforceable. Even if the final vote is held and passed this spring, there is still an implementation window of 12-18 months.
– Laura Navaratnam, director of Gattaca Horizons and former head of fintech at the FCA
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