As Congress prepares to hold a historic joint hearing on creating new, fit-for-purpose rules for the crypto industry, the ongoing regulatory crackdown has raised concerns about the future of this rapidly growing sector. Marco Santori, Kraken’s chief legal officer and a leading blockchain and cryptocurrency law expert, has provided valuable insight into the need for clear and consistent regulations to foster innovation and protect investors.
Kraken’s CLO Asks For Balanced Crypto Regulations
In a recent tweet, Santori highlighted the “untenable” situation in the US, noting that other countries are moving ahead with clear and consistent regulations that enable innovation while protecting consumers. He stressed the need for US regulators to take a more proactive approach to crypto, creating a regulatory framework adaptable to the industry’s ever-changing nature.
1/ Tomorrow, Congress will hold a historic joint hearing between both the Agricultural and Financial Services committees on creating new, fit-for-purpose rules for crypto.
I’ll testify live.
— Marco Santori (@msantoriESQ) May 9, 2023
Santori’s call for new laws significantly differs from his previous stance. As a long-time advocate for self-regulation within the industry, he has never before advocated for new laws. However, he believes that the current regulatory environment in the US is hindering the industry’s growth and putting US companies at a disadvantage compared to their international counterparts.
Santori suggests that adopting a more collaborative approach is one way to improve how regulators interact with crypto. Rather than viewing regulators as adversaries, he believes greater engagement between regulators and the industry can lead to better outcomes for everyone involved. This includes developing clearer guidelines for compliance, educating regulators on the unique aspects of the industry, and fostering innovation through responsible regulation.
Additionally, Santori pointed out that the current “endless litigation” environment is detrimental to businesses like Kraken and fails to protect consumers. The lack of clear and consistent regulations can make it difficult for companies to plan for the future, invest, hire, or allocate time effectively.
Santori believes that Congress is important in improving the cryptocurrency industry’s regulatory environment. By providing regulators with the tools and resources they need to oversee the industry effectively, Congress can help to foster innovation while ensuring that consumers are protected.
Former CFTC Chair To Testify At Congressional Hearing
Former Commodity Futures Trading Commission Chair, Timothy Massad, is set to testify before Congress tomorrow on the need to strengthen digital asset regulation. In his prepared statement, Massad highlighted the gap in regulation for the spot market in crypto tokens that are not securities, such as Bitcoin. He emphasized that this gap still exists and is complicated by the ongoing debate on classifying digital assets.
Massad urged Congress to fix this gap, suggesting that there are essentially two paths to follow. He believes one path is preferable and will explain this in his testimony tomorrow.
Massad also highlighted the lack of clarity in the rules for resolving the issue of whether digital assets are securities or commodities. Trading and lending platforms claim they only deal in tokens that are not securities, thereby avoiding direct federal oversight.
As a result, investor protection on crypto trading and lending platforms is inadequate. The failures of trading platform FTX, crypto lender Celsius, the Terra/Luna stablecoin, and others last year resulted in hundreds of thousands of investors suffering losses.
The joint hearing is important in the ongoing efforts to create a clear and consistent regulatory framework for the cryptocurrency industry. The insights and recommendations Santori and Massad provide will be closely watched by industry participants and policymakers alike and are expected to impact future regulatory decisions significantly.
Featured image from Unsplash, chart from TradingView.com