U.S. crypto regulations underway ‘behind closed doors’: Blockchain Association CEO

• According to Blockchain Association CEO Kristin Smith, the industry wants American lawmakers to spearhead crypto legislation.
• According to Knot, the FSB has an “ambitious work schedule” for completing a regulatory framework for crypto assets in 2023.

Blockchain Association CEO Kristin Smith said in a Feb. 22 Bloomberg interview that despite the process being “extremely long” and regulators “stepping in” in the interim, the sector wants U.S. lawmakers to lead crypto legislation.

The leader of the important U.S. business association for crypto advised that the United States Congress take control of crypto legislation. This would make it a more “open process” where lawmakers could examine the market “comprehensively.”

Smith remarked that although regulators are “moving extremely swiftly,” legislation is being developed “behind closed doors,” suggesting that increased industry participation in an “open process” that would be visible to Congress is essential. According to Smith, the problem with regulators enforcing laws and settling disputes is due to “extremely unique facts and conditions.”

Challenges for the U.S. Congress

Since many people in Washington D.C. who “were close” to former FTX CEO Sam Bankman-Fried and FTX felt “burned” and “betrayed” over the collapse of the cryptocurrency exchange in November 2022, she added that Congress is in a difficult situation at the present.

According to Smith, Congress has been considering stablecoin regulation “since 2019” and the “work has been done.” He is optimistic that it will take place soon in the United States. Before FTX’s demise, she claimed it “came close” to happening in 2022.

In a letter dated February 20 this year and distributed to the G20’s finance ministers and central bank governors, Financial Stability Board (FSB) chair Klaas Knot described how the organization expects to handle major threats to financial stability this year. DeFi and crypto assets occupied a significant position on the FSB’s list of challenges.

According to Knot, the FSB has an “ambitious work schedule” for completing a regulatory framework for crypto assets in 2023. The G20 established the FSB, an advisory group connected to the Bank of International Settlements (BIS). It is powerless to impose anything.

Smith continued by saying that because crypto risks are distinct from those associated with conventional financial services, regulators must devote more time to studying market regulation and “tailoring to those risks.”

Crypto regulations need higher priority 

Public ledgers make it “far more visible” than the existing financial system, according to Smith, who argued that stablecoin and “market side” regulation should take precedence over outlawing crypto-related criminal activities.

The Securities and Exchange Commission (SEC) of the United States is cracking down on web3 enterprises by implementing stringent restrictions. Nonetheless, enforcement happens even though Congress has not yet passed any crypto legislation.

Recently, the organization fined Kraken $30 million and ordered the closure of its staking reward facilities. Paxos was also forewarned by the SEC of possible legal action for violating securities laws.