The Center for American Progress is calling for much-tougher regulation of cryptocurrencies.
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Progressives in Washington are calling for much-tougher regulation of Bitcoin and other cryptocurrencies, and they are likely to get a favorable reception in the Democratic-controlled Congress and Biden Administration.
The latest call for cracking down on cryptos came from the Center For American Progress, a left-leaning think tank, on Monday. The Center issued a report on digital assets, calling on the Securities and Exchange Commission to use existing statutes and rules to regulate vast swaths of the industry.
“The SEC can use its existing authorities to green the blockchain, protect investors, and prevent money laundering, tax evasion, and criminal activity,” the report said.
SEC Chairman Gary Gensler has come out swinging against cryptos and related stablecoins, referring to the industry as the “wild West” in recent public commentary. Gensler taught a course on “blockchain and money” at the Massachusetts Institute of Technology. And he now appears intent on expanding the SEC’s oversight over the industry.
“It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These products are subject to the securities laws and must work within our securities regime,” Gensler said in August.
Democrats in Congress have also been talking tough on crypto and calling for more oversight and tax-reporting requirements—partly to raise revenue for their legislative priorities. The infrastructure bill that passed the Senate last August included new tax-reporting requirements on crypto transactions, despite opposition from some Republicans.
Still, cryptos like Bitcoin may be tough to regulate as securities since they aren’t offered or sold by any centralized entity.
The same can’t be said for stablecoins, however, which are now in Washington’s hot seat. The tokens are designed to have a stable $1 value, and they’re supposed to be backed 1-1 by cash and other high-quality reserves. But backers and issuers of the coins don’t disclose much about the composition of their reserves, raising concerns among regulators that a run on a stablecoin could destabilize broader capital markets.
The Treasury Department and other federal agencies may now be close to issuing a regulatory framework for stablecoins, subjecting their issuers to banking or money-market fund rules, according to recent reports in The Wall Street Journal and elsewhere.
The Fed, meanwhile, is expected to issue a major report on digital assets as early as this week, laying out its thinking on a potential “digital dollar.” Regulating cryptos isn’t likely to be part of the report, but it may still thrust the digital currencies into the spotlight.
While investors should brace for a rocky week in cryptos, the coins don’t appear under pressure so far.
Bitcoin was trading up 1.5% on Monday to $48,686, holding a 12.5% gain over the last seven days. Ethereum, the second-largest crypto, was off 1.2% to $3,380, but remains up 11% over the last week.
Write to Daren Fonda at daren.fonda@barrons.com
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