In its much-anticipated cryptocurrency executive order issued earlier this month, the Biden administration referred to as for a coordinated interagency method to the regulation of digital belongings and to the research of their potential dangers.
A big a part of this effort focuses on the nation’s major shopper safety businesses, the Federal Commerce Fee (FTC) and the Client Monetary Safety Bureau (CFPB).
Traditionally, the Securities and Trade Fee (SEC), the Commodity Futures Buying and selling Fee (CFTC), and the Monetary Crimes Enforcement Community (FinCEN) have performed the first roles in regulating digital belongings, with the FTC and CFPB largely taking a wait-and-see method. However this has left open a regulatory hole for crypto actions that don’t contain a safety or a commodity by-product.
The Biden administration is shifting focus to shopper safety, naming it as the primary principal coverage goal of the chief order. Particularly, the order directs the heads of the FTC and CFPB, amongst many different businesses, to submit a report on the implications of developments in and the adoption of digital belongings.
Of explicit relevance to the FTC and CFPB, the order encourages the businesses to contemplate what results the expansion of digital belongings may have on competitors coverage and the way privateness and shopper safety measures inside their jurisdictions can serve digital asset customers. The report additionally ought to include coverage suggestions that embody potential regulatory and legislative actions to guard U.S. individuals.
The brand new focus by the FTC and CFPB on the digital asset house raises vital questions. For instance:
- What points will the FTC and CFPB give attention to?
- What is going to enforcement on this space appear to be?
- What authority will the businesses depend on, or will new authority be wanted to control the house?
The FTC and CFPB have broad authority to analyze and shield towards “unfair” and “misleading” acts and practices (the CFPB additionally has authority over “abusive” acts and practices). These powers present the FTC and CFPB with an excessive amount of flexibility and should play an vital position in shaping the regulation of digital asset actions that fall outdoors of the SEC’s jurisdiction over securities.
Final 12 months the FTC reported a dramatic improve in cryptocurrency scams 12 months over 12 months, particularly calling out bogus funding web sites and scams involving impersonation of celebrities promising to multiply shoppers’ cash. Plaintiffs have additionally initiated class action lawsuits towards actual celebrities for his or her roles in endorsing cryptocurrency tasks, solely to promote their holdings in alleged pump-and-dump schemes. The FTC could be effectively geared up to use its endorsement guides to this exercise to raised shield shoppers.
The CFPB may assert authority over interest-bearing cryptocurrency accounts and crypto lending merchandise which are more and more being supplied by cryptocurrency exchanges. The CFPB might also discover whether or not it has authority over custodial cryptocurrency wallets by means of its pay as you go rule underneath Regulation E.
Per Biden’s order, the FTC and CFPB will embody of their report their coverage suggestions, together with potential regulatory actions, as applicable to guard shoppers and broaden entry to secure and inexpensive monetary companies. Whether or not further funds assets are offered to the businesses to satisfy the duties outlined within the govt order stays to be seen.