“You have an entire political party here that’s always in the pockets of the big financial companies, whether it’s a crypto company or JPMorgan Chase,” he pouted at Republicans. “So it’s always difficult to do something legislatively. That’s why we rely on regulators so often.”
Brown’s cautious approach to crypto legislation amid mounting calls for a bill underscores how difficult it will be for Congress to agree on a plan, even in the face of a crisis that reveals weaknesses in regulation. FTX, once one of the industry’s largest exchanges and the most prominent voice in Washington, filed for bankruptcy on Friday and is now under investigation for misusing customer funds.
“This is now a frontburner issue,” said Sen. Cynthia Lummis (R-Wyo.), an industry supporter who a various comprehensive regulation bill with sen. Kirsten Gilbrand (DN.Y.). “By not addressing the rapidly growing digital asset industry for months, we put ourselves at a regulatory disadvantage in dealing with the lack of consumer protection.”
Two key issues that legislators have yet to address are the extent to which agencies have sufficient existing authority to monitor the market and, if not, which agency should be empowered to monitor it.
SEC and CFTC leaders are vying for parts of the crypto market, and the split is reflected in legislation emanating from Capitol Hill.
Sen. Elizabeth Waren (D-Mass.) said Tuesday that a digital currency bill must be “comprehensive,” covering consumer protections, money laundering regulations and climate protection measures for crypto mining.
When asked if the SEC has sufficient powers right now, she said the agency “could do more with the current agencies, but to regulate this entire space we need additional legislation from Congress.”
Warren said it’s an “open question” whether the SEC should be the primary regulator.
“The SEC has certainly shown in the past that it has a strong propensity for consumer protection, but it also needs more resources to carry out its current duties,” Warren told reporters.
Senate Agriculture Committee chairmen are backing a bill that would give the CFTC a larger role in overseeing crypto trades. The CFTC today focuses primarily on financial derivatives such as futures contracts.
The bill – introduced by the Chairman of the Senate for Agriculture Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.) – comes under scrutiny after the FTX collapse because the company was a key lobbying force behind the legislation. SEC Chairman Gary Gensler said the proposal was “too frivolous.”
Boozman said in an interview that the committee is working with the CFTC and other stakeholders “to make sure the legislation we propose prevents things like this and protects consumers.”
“Right now people are trying to figure out why it imploded,” Boozman said. “You don’t really know what the changes are until you know exactly what’s happening.”
Asked if former FTX CEO Sam Bankman-Fried helped write the bill, Stabenow said in an interview, “We had input from everyone who was interested in a transparent system that offered accountability and regulation – so we certainly took his contribution.”
“The CFTC chairman, the SEC, the Treasury Department — we’ve worked with everyone because that’s exactly what I was concerned about,” she said. “Right now there is no consumer protection and the CFTC does not have the legal authority to intervene unless there is a crisis.”
The FTX collapse, Stabenow said, “is an example of why we need [the bill] more than ever.”
Sen. Cory Booker (DN.J.), a member of the Agriculture Committee, said: “Whether the industry contributes or not – that will always happen.”
“This law is a bipartisan law” aimed at consumer protection, Booker said.
Brown, a member of the Agriculture Committee, said the bill “needs significant improvement” and that he has not yet finished working on the proposal to ensure it is as aggressive as it needs to be.
He said the CFTC has “narrow jurisdiction” and “we want it to be aggressive.”
Brown said that the financial industry’s contribution to financial regulatory issues — in this case, crypto firms charging crypto bills — “is always greater than it should be.”
“I generally believe that, and everything I see tells me that,” he said.