For years now, legislative inaction has given rise to jurisdictional ambiguities in the regulation of cryptocurrencies and decentralized finance (DeFi). Multiple regulatory agencies — most notably the U.S. Securities and Exchange Commission (SEC) and U.S. Commodity Futures Trading Commission (CFTC) — have tried to get a handle on crypto, but little has been done by Congress to provide clarity for regulators or the crypto industry.
One thing is becoming clear, though: as more money flows into the digital asset market (it broke $3 trillion in 2021), regulators are signaling louder than ever their plans for crypto enforcement.
Whether Congress Will Act Remains To Be Seen
The SEC, CFTC, U.S. Department of Justice (DOJ) and U.S. Treasury Department have all recently indicated their intention to step up efforts to regulate the crypto space. In this environment of heightened regulatory risk, firms that deal in crypto and DeFi lending will need to be ready for increased scrutiny from multiple legal fronts.
A task force of financial regulators recently issued a report calling on Congress to address regulatory ambiguities, particularly around the class of cryptocurrencies known as stablecoin. However, until Congress takes action, the SEC and CFTC plan to continue exercising their broad authorities, even in the absence of regulatory clarity.
The DOJ also recently launched its National Cryptocurrency Enforcement Team, which is tasked with monitoring crypto exchanges and platforms for potential money laundering, and the Treasury’s Financial Crimes Enforcement Network joined the CFTC’s civil case against BitMEX, alleging violation of money laundering rules.
This degree of cross-agency regulation and enforcement should put crypto firms on alert. Legal counsel with extensive experience in crypto and fintech is crucial for firms that want to avoid litigation and penalties.
If you have questions or concerns about cryptocurrency, securities law or related regulatory matters, we encourage you to consult with the cryptocurrency and securities law attorneys at Ford O’Brien Landy, LLP. Our firm advises and represents clients in New York and nationwide.
Source: Law360, “Crypto Industry Should Brace For Brewing Enforcement Storm,” Dean Seal, Nov. 10, 2021