As more investors, companies and the public embrace cryptocurrency, which has become a record $2 trillion market, government oversight and regulations remain nonexistent or patchy at best. Congress has been slow to enact legislation on this emerging industry that experts say is fraught with fraud, scams and investor risk.
Congress and federal regulatory agencies continue to discuss and lay groundwork for potential future cryptocurrency regulation, but legal and financial experts say it is well past time for a regulatory framework that focuses on crypto trading, lending and decentralized finance platforms.
“Everybody wants to work toward regulation, but we just aren’t getting there quickly enough,” said Katherine Dowling, general counsel and chief compliance officer at Bitwise Asset Management in San Francisco, during a panel discussion on cryptocurrency law at the ABA Hybrid Annual Meeting. “We have this incredibly new asset that deserves original thought,” Dowling said. “But we’re trying to fit it into frameworks that are old and crusty — and they don’t necessarily work.”
The U.S. has fallen behind other countries like Switzerland and Singapore in its response to cryptocurrency, according to panelist David Yermack, a professor and chair of the finance department at New York University’s Stern School of Business. “The U.S. regulatory strategy up to now has been denial, hoping that this will go away,” Yermack said.
As a result of inaction, Dowling said the U.S. is losing “amazing, innovative” companies to other countries that offer exchanged traded funds (ETFs) and have clearer regulations. “We should be looking at those countries to see how they’re regulating and how we can get there.”
Beyond efforts abroad, local U.S. regulatory initiatives may provide a blueprint for the federal response.
Much of the innovation in the American virtual cryptocurrency space is happening at the state level, Yermack said. “Wyoming is the state everyone points to, but the others are Wisconsin, Vermont and Arizona.” He would like to see the best of these state laws “make their way into the federal statutes.”
- Annual Meeting program “Cryptocurrency Law: The Wild West or the Financing of the Future?”
- “ABA releases updated white paper regarding cryptocurrencies and digital assets”
- “Cryptocurrency and federal tax enforcement”
- “Forensic analysis of digital currencies in investigations”
- “Digital and digitized assets: Federal and state jurisdictional issues”
- ABA Journal: