US Congress sets sights on federal cryptocurrency rules

U.S. lawmakers are moving to consider new rules that could impose stricter federal oversight on the emerging asset class

Ramy Caspi
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Jolted by the global investment craze over bitcoin and other cryptocurrencies, U.S. lawmakers are moving to consider new rules that could impose stricter federal oversight on the emerging asset class, several top lawmakers told Reuters.

Bipartisan momentum is growing in the Senate and House of Representatives for action to address the risks posed by virtual currencies to investors and the financial system, they said.

Even free-market Republican conservatives, normally wary of government red tape, said regulation could be needed if cryptocurrencies threaten the U.S. economy.

There’s no question about the fact that there is a need for a regulatory framework,” said Republican Senator Mike Rounds, a Senate Banking Committee member.

A lot of people don’t realize there’s nothing backing these virtual currencies,” said Carolyn Maloney, a Democratic senior member of the House Financial Services Committee (HFSC).

We have to look carefully at all of the cryptocurrencies and make sure individuals don’t get taken advantage of,” added Rep. Tom MacArthur, an HFSC Republican.

Even members of the House Freedom Caucus — widely considered to be the most libertarian and anti-regulatory group in Congress — said that they were open to making an exception to address the perceived threats of cryptocurrencies.

I‘m a total free-marketer, so I don’t want to regulate,” said Republican Representative Dave Brat, a member of the conservative House Freedom Caucus. “But if it’s a currency that could destabilize the whole economy, you’re going to have that conversation.”

Digital assets currently fall into a jurisdictional gray area between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Treasury Department, the Federal Reserve and individual states.

Much of the concern on Capitol Hill is focused on speculative trading and investing in cryptocurrencies, leading some lawmakers to push for digital assets to be regulated as securities and subject to the SEC’s investor protection rules.

SEC Chairman Jay Clayton reiterated that his agency’s main interest was in supervising initial coin offerings (ICOs), the bulk of which he says have violated federal securities regulations. CFTC Chairman J. Christopher Giancarlo, meanwhile, expressed that it would be a significant overreach of his agency’s mandate to supervise the cryptocurrency spot markets, which heretofore have been primarily regulated in the US at the state level.

The SEC is properly the lead on the issue,” concluded Republican Representative Bill Huizenga, chairman of the House Financial Services Subcommittee on Capital Markets. “Six months ago, we didn’t see this explosion. The marketplace has changed.”