Stablecoin Regulation in the U.S. and FTX Collapse
The United States needs a "comprehensive" approach to regulating the entire cryptocurrency marketplace, including stablecoins.
Kristin Smith, CEO of the Blockchain Association, a U.S. crypto industry nonprofit, said in an interview, that regulators have moved too quickly, with many in Washington D.C. feeling “burned” and “betrayed” over the collapse of FTX last year.
Congress and crypto legislation
Congress should lead in creating crypto legislation, even though it may slow down the process. Smith said this open process would allow the entire industry to be looked at comprehensively, with more industry involvement.
She added that regulators should not lead legislation with enforcement actions and settlements because this approach relates to “very specific facts and circumstances.”
Industry involvement in an open process
Smith said that the entire crypto industry should be involved in creating a more “open process” for legislation. This would mean that Congress takes control of crypto legislation and that the marketplace is looked at comprehensively.
Difficulties of Congress
It is difficult for Congress to take control of crypto legislation because many people in Washington D.C. who were close to former FTX CEO Sam Bankman-Fried and FTX feel burned and betrayed over the collapse of the cryptocurrency exchange.
Hope for stablecoin regulation in the US
Smith is hopeful that stablecoin regulation will soon happen in the U.S., saying that Congress has been looking at it “since 2019” and the “work has been done.” She said it “came close” to happening last year before the collapse of FTX.
Regulating crypto risks
Regulators must look more into cryptocurrency market regulation and “tailor to those risks”. This is because crypto risks differ from those in traditional financial services.
Smith suggested that stablecoin and “market side” regulation should be prioritized over legislating crypto-related criminal activity. She believes that public ledgers make it “much more transparent” than we see in the traditional financial system.
Focus on stablecoin and market-side regulation
According to Jake Chervinsky, chief policy officer of the Blockchain Association, the focus should be on regulating stablecoin and market-side regulation.
He noted that neither the Securities and Exchange Commission nor the Commodity Futures Trading Commission has the authority to “comprehensively regulate crypto,” no matter how many enforcement actions they bring.