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So who gets to regulate cryptocurrency?

Technology for Lawyers

Published: May 12, 2023

In what could be a major plot point in an early William Gibson novel, federal agencies are fighting to determine who gets to regulate cryptocurrency—without there being any written regulations or guidance from Congress or the administration, according to a recent analysis from Wired Magazine.
“It’s like driving down the road, with no signs or lanes, trying to figure out the rules based on who gets pulled over,” said Dave Siemer, CEO at Los Angeles–based crypto investment firm Wave Digital Assets, as quoted in the article. “You’re just guessing.”
Here’s the layout. On March 22, Coinbase, one of the largest cryptocurrency exchanges (and where I keep mine) was noticed by the SEC that the regulator planned to sue, alleging violation of securities law. De facto, then, the SEC was defining crypto as a security.
But hold on. On March 27, Binance, and even bigger crypto exchange (the world’s largest) was noticed by the Commodities and Futures Trading Commission (CFTC) that it was breaking commodities laws. Which would make cryptocurrency, you know, a commodity.
In the words of Bill Lumbergh: “Yeah.”
And as the crypto exchanges around the world say: “What?”
And also, I kind of treat my crypto wallet with Coinbase as an investment banking account (albeit one that changes in value every few minutes). What about bringing them in under Title 12—banking regulations?
The SEC has been active in bringing actions within the crypto sphere since the beginning of the year, targeting Kraken and Gemini among other crypto exchanges.
These actions from both the SEC and the CFTC come without any crypto-specific regulatory framework for the exchanges. The agencies just call cryptocurrency whatever they want to. And maybe they can.
The SEC at least wants crypto exchanges to register with it. Right? But the head of Coinbase said that every exchange that tried to do so “failed miserably.”
So grab the popcorn. The agencies are setting themselves up for a long legal struggle once the industry starts pushing back.
For the full lowdown:
Pro Tip: Wired is running a $5/ 1st year subscription deal and you get stickers. Did it.