One of the top financial regulators in the US has stated that the cryptocurrency market is “rife with fraud and hucksters and grifters.”
According to US Securities and Exchange Commission (SEC) chair Gary Gensler, the failure of cryptocurrency companies to abide by the laws his organization attempts to enforce has resulted in “an excessive amount of money being lost by investors globally.”
It coincides with the industry’s millions-dollar political donation campaign, which aims to sway the results of the US elections in November in the hopes of favorable laws down the road.
There are 435 House of Representatives districts up for reelection, along with 33 Senate seats, in addition to the contest between Donald Trump and Kamala Harris for president.
There seems to be a clear difference between the administrations of Donald Trump and Joe Biden regarding the future of cryptocurrencies, one of the most debated technologies in the world.
By promising to establish a “strategic national bitcoin stockpile” akin to the US government’s gold reserves and to make America “the crypto capital of the planet,” Trump has been trying to win over cryptocurrency enthusiasts with his campaign promises.
He declared, “I think crypto is one of those things we have to do,” at the launch of World Liberty Financial, a new cryptocurrency venture, this week, despite giving few specifics.
Three years ago, he wrote off Bitcoin as something that “seems like a scam” and a danger to the US dollar. This represents a significant change in his views.
With Harris serving as vice president in the Biden administration, Trump’s newly discovered enthusiasm stands in sharp contrast. In recent years, the White House has spearheaded an extensive crackdown on cryptocurrency companies.
Sam Bankman-Fried, the creator and CEO of FTX, was sentenced to 25 years in prison in March for fraud after embezzling billions of dollars from clients worldwide, many of whom are still pursuing money recovery.
Subsequently, in April, Changpeng Zhao, the creator of Binance, the largest cryptocurrency exchange globally, was sentenced to four months in prison, and the company settled a $4.3 billion (£3.2 billion) fine. In an investigation brought by the US Justice Department, he acknowledged to having let terrorists, criminals, and child abusers use his platform to launder money.
In court, the SEC is pursuing a case against Binance. It is one of a record-breaking 46 enforcement actions against companies attempting to make money off of still-emerging technology that the financial regulator took last year.
According to Mr. Gensler, people in this industry have recently emerged, and they mistakenly claim that they “don’t think we want to comply with the time-tested laws” just because they’re keeping track of their cryptocurrency holdings on a new accounting ledger.
He says regulations requiring businesses seeking to raise capital from the public to “share certain information” with them have been in place since the establishment of the SEC in order to safeguard investors.
This occurred in 1934, following the Great Depression’s outbreak with the Wall Street crash of 1929.
Mr. Gensler states, “Crypto is just a small piece of the US and worldwide capital markets, but it can undermine everyday investors’ trust in the capital markets.”
Supporters contend that cryptocurrency provides a quick, affordable, and safe means of transferring money, but according to a Federal Reserve survey, fewer Americans are using it now than they were in 2021 (12% vs. 7%).
Though one of Harris’s advisors stated last month that she would “support policies that ensure that emerging technologies, and that sort of industry, can continue to grow,” Harris hasn’t said much about cryptocurrencies.
Her team’s recent meetings with business executives have aimed to foster trust and given cryptocurrency executives optimism for a better future, regardless of the outcome in November.
Paul Grewal, the chief legal officer of cryptocurrency company Coinbase, said, “I can’t emphasize enough how important this is, not just for the US, but for the whole world. The US is not only a significant market for cryptocurrencies, but it has also produced a large amount of the key technology in the field. Furthermore, I believe it’s crucial that we remember that the rest of the world is not just waiting for the US to get its act together.”
“Every vote is going to count, and crypto votes are no exception,” he continues, pointing out how close the race for the White House is.
This year’s US crackdown on cryptocurrencies has been replicated in Europe. In an effort to lessen the likelihood that criminals will use cryptocurrency, the European Union passed new legislation in April.
Other regulators, though, are acting more slowly. Minimum standards for cryptocurrencies are being developed by the G20 group of major economies; however, adoption of these standards has been sluggish and they are not legally binding.
Back home in the United States, the House has approved a bill regulating cryptocurrencies, but the Senate has not. Critics claim that consumers will have less protection as a result.
Mr. Grewal of Coinbase supports the legislation, stating, “This is not an industry that is shying away from regulation.” The industry, he continues, simply wants the same standards to be applied to cryptocurrencies as they are to other assets—”no tougher, but no weaker.”
The cryptocurrency industry has recognized an opportunity to support the election of lawmakers who have a positive outlook on the companies as the US elections in November draw near.
According to analysis by the nonprofit Public Citizen, by the end of last month, the industry had already spent an unprecedented $119 million on donations.
Regardless of political affiliation, according to research director Rick Claypool of the consumer advocacy organization, the funds are being used to support the election of pro-crypto candidates and target those who are critical of the industry.
He continues, “They are trying to discipline the US congress to give in to their demands for less oversight and to weaken protections for consumers,” which is why they have spent more on corporate donations than any other industry.
