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Lawmakers Believe The Crypto Crackdown Is Overdone

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Crypto companies are gaining support from both Republicans and Democrats for a softer regulatory approach. But their problems with the Securities and Exchange Commission aren’t going away anytime soon.

On Thursday, a bipartisan group of lawmakers filed legislation that would delegate authority to the Commodity Futures Trading Commission to regulate most cryptocurrencies. Representatives from the cryptocurrency industry hailed the move, partly because they consider the CFTC, which also supervises financial derivatives, as a less stringent regulator than the SEC.

Gary Gensler, the SEC’s chairman, has directed the agency to tighten down on a number of cryptocurrency initiatives. He has stated that many of the tokens traded on crypto exchanges are likely securities, which would necessitate far more disclosures and registration with authorities on the part of tokens and the platforms that sell them. This would have far-reaching consequences for unregistered exchanges such as Coinbase Global (ticker: COIN), FTX.US, and Binance. the US.

His department also secured a $100 million fine from crypto-lending startup BlockFi Inc. in February, the largest-ever fine for a crypto corporation. Reps. Glenn Thompson, Tom Emmer, Ro Khanna, and Darren Soto introduced the bill on Thursday. It would subject numerous tokens to the CFTC’s jurisdiction and allow exchanges to register with that agency rather than the SEC.

The trouble for the sector is that the measure, like any comprehensive crypto legislation, has little chance of becoming law anytime soon due to MPs’ disagreements on the matter. Despite Republican support for the bill, other Republicans, including House Financial Services Committee ranking member Patrick McHenry, believe crypto needs a new regulator.

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“There is no viable path to legislating on structural digital asset issues in this Congress,” said Isaac Boltansky, director of policy analysis at the financial services firm BTIG. “Everything we are seeing from Capitol Hill is intended to either plant a flag in the regulatory discourse or position ahead of the debate we will see in the next Congress.”

And, while legislators may be debating legislation for years, Gensler shows no indications of slowing down right now. According to a copy of the letter seen by Barron’s, Gensler wrote to Republican lawmakers on Wednesday, including Reps. Warren Davidson (R., Ohio) and Tom Emmer (R., Minnesota), who co-sponsored Thursday’s bill, saying he has asked “SEC staff, working with our regulatory and law enforcement partners, to use our current authorities to bring more investor protection” to the markets for stablecoins and crypto-yield products.

According to Gensler, “there is no reason why crypto assets and stablecoins should be handled differently from traditional investment structures just because of the technology utilized.”

Gensler’s letter came in response to a letter from lawmakers in October claiming that the SEC lacked the authority to regulate many such projects.

Gensler, on the other hand, is adamantly opposed. He’ll remain a thorn in the side of crypto companies seeking for less regulation unless Congress pass a bill or the SEC starts losing in court.