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Explainer-How U.S. regulators are cracking down on cryptocurrencies

Explainer-How U.S. regulators are cracking down on cryptocurrencies
Explainer-How U.S. regulators are cracking down on cryptocurrencies   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p>By Michelle Price</p> <p><span class="caps">WASHINGTON</span> – Regulators globally are cracking down on cryptocurrencies, alarmed at a rapidly expanding market that exceeded a record $2 trillion in April. China on Friday said it was banning all crypto trading and mining, sending digital coins tumbling. </p> <p>Global regulators worry the rise in privately operated currencies could undermine their control of the financial and monetary systems, increase systemic risks, promote financial crime and hurt investors. </p> <p>In the United States, President Joe Biden’s regulators have launched several efforts to rein in cryptocurrencies. Here’s the breakdown:</p> <p><span class="caps">THE</span> <span class="caps">PRESIDENT</span>’S <span class="caps">WORKING</span> <span class="caps">GROUP</span> ON <span class="caps">STABLECOINS</span></p> <p>The President’s Working Group on Financial Markets, comprising top financial regulators, is focusing on stablecoins, a type of digital coin pegged to traditional currencies.</p> <p>The group traditionally includes the Treasury Department, Federal Reserve, Securities and Exchange Commission (<span class="caps">SEC</span>) and the Commodity Futures Trading Commission (<span class="caps">CFTC</span>), but the Federal Deposit Insurance Corporation (<span class="caps">FDIC</span>) and the Office of the Comptroller of the Currency (<span class="caps">OCC</span>) are also involved.</p> <p>During a July meeting, the group discussed the rapid growth of stablecoins, their potential uses as a means of payment, and their potential risks to users, the financial system and national security. Afterward, Treasury Secretary Janet Yellen said the government must move quickly to establish a regulatory framework for stablecoins.</p> <p>In meetings with industry executives this month, the Treasury also asked whether some stablecoins would merit direct oversight if they became extremely popular, Reuters reported https://www.reuters.com/technology/exclusive-us-treasury-financial-industry-discuss-cryptocurrency-stablecoins-2021-09-10. </p> <p>The group is expected to publish a report detailing the risks and opportunities of stablecoins in coming months. </p> <p>U.S. <span class="caps">SECURITIES</span> <span class="caps">AND</span> <span class="caps">EXCHANGE</span> <span class="caps">COMMISSION</span></p> <p>The main action is coming out of the <span class="caps">SEC</span>. In testimony before the Senate this week, <span class="caps">SEC</span> Chair Gary Gensler said the agency was examining cryptocurrencies in a number of areas: the offer and sale of crypto tokens; crypto trading and lending platforms; stable value coins; investment vehicles providing exposure to crypto assets or crypto derivatives, and the custody of crypto assets.</p> <p>Gensler’s <span class="caps">SEC</span> also appears to be taking a more aggressive legal interpretation of when crypto assets fall within its purview than the agency did under former President Donald Trump. Gensler has said, for example, that so-called “DeFi platforms” – peer-to-peer crypto platforms that bypass the traditional gatekeepers of finance such as banks and exchanges – fall within the <span class="caps">SEC</span>’s purview. </p> <p>The agency brought its first DeFi-related enforcement action https://www.sec.gov/news/press-release/2021-145 last month.</p> <p><span class="caps">THE</span> <span class="caps">FED</span>’S <span class="caps">CENTRAL</span> <span class="caps">BANK</span> <span class="caps">DIGITAL</span> <span class="caps">CURRENCY</span> <span class="caps">PROJECT</span></p> <p>The U.S. Federal Reserve is due shortly to issue a hotly anticipated report exploring the potential adoption of a digital dollar, while the Boston regional Fed is also working with the Massachusetts Institute of Technology to explore the technical aspects of a digital dollar. </p> <p>While the Fed is on the fence about creating its own digital coin, many policymakers in Washington see it as a critical step in combating the rise of privately operated digital coins.</p> <p><span class="caps">BANKING</span> <span class="caps">REGULATORS</span>’ ‘<span class="caps">SPRINT</span>’ <span class="caps">TEAM</span></p> <p>In parallel, a small group of senior staff at the Fed, <span class="caps">OCC</span> and <span class="caps">FDIC</span> have been collaborating on a “crypto policy sprint” focused on cryptocurrencies in relation to the banking sector. </p> <p>Acting <span class="caps">OCC</span> head Michael Hsu has said the goal of the group is to “agree on definitions, use cases, risks, and gaps, and to discuss policy options related to digital assets.” </p> <p>As part of that effort, the <span class="caps">OCC</span> is also reviewing a decision by the head of the agency under Trump that allowed national banks to provide custody of cryptocurrency. </p> <p/> </div>