CFTC commissioner wants guidance on penalising crypto firms

There is uncertainty as to which regulatory categories cryptocurrencies fall under

A US Commodity Futures Trading Commission (CFTC) commissioner has urged against rash regulatory clampdowns on the nation’s cryptocurrency firms. 

In an interview with the Financial Times, Dawn DeBerry Stump said: “What I discourage here at the CFTC is to take coercive action without giving the tools they need to be compliant.”

The commissioner alluded to the $1.25m (£950,000) fine meted out by the CFTC to cryptocurrency exchange Kraken for its failure to register as a futures broker as an example of hasty enforcement.

Republican commissioner

She stated: “I would have preferred that we would not have brought those types of cases until we had better defined how they might achieve compliance.”

Stump previously worked as a vice president at NYSE Euronext, a now-defunct multinational financial corporation that operated both the New York Stock Exchange and pan-European exchange Euronext. 

The sole Republican commissioner at the CFTC, she stressed her opposition to “regulation by enforcement”, adding: “I think there is a lot going on right now.”

Categorisation uncertainty

The rapid growth enjoyed by the cryptocurrency sector in recent years has prompted calls for increased regulatory scrutiny. One central problem for regulators, however, is determining the precise regulatory jurisdiction under which the broad range of cryptocurrencies fall.

The chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has argued that, although many cryptocurrencies could be defined as securities, existing guidance is sufficiently clear. 

Addressing the categorisation of cryptocurrencies as securities at a meeting of the Investor Advisory Committee last week, Gensler said: “There’s actually a lot of clarity on that front. In the 1930s, Congress established the definition of a security, which included about 20 items, like stock, bonds and notes.”

Unregistered securities?

Adding that “one of the items is an investment contract”, Gensler said that many cryptocurrencies “may be unregistered securities, without required disclosures or market oversight”.

Stressing his concern for the lack of investor protection within the cryptocurrency space, he stated: “If we don’t address these issues, I worry a lot of people will be hurt.”

Commissioner Stump, meanwhile, expressed in her latest interview her desire for the SEC to give “more detail on how they come to the conclusion that some of these things are securities”.

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