The chairman of the Commodity Futures Trading Commission (CFTC), Heath Tarbert, writing in the Harvard Business Law Review earlier this week, called for an approach that is less impeding towards cryptocurrency regulations.
In the elaborate article, the financial regulator published a set of principles that emphasized the need for regulatory bodies to pursue crypto regulations from the standpoint of broad fundamentals, and not distinct rules. Relaxation of existing rules will make the United States lead the blockchain-driven cryptocurrency market and simplify financial transactions.
The article mostly contains suggestions or approaches that financial regulators can undertake. Here, Tarbert explains how a speed restriction rule can unequivocally state, “Forbid driving faster than 55mph”. On the contrary, a principled perspective towards speed monitoring might suggest drivers to “Drive vigilantly under specific circumstances.”
Tarbert elaborated on how fundamental approaches became associated with ‘light-touch regulations’ in the 2000s. However, it was more of a controlling system, rather than being regulatory. In contrast, principle-based standpoints are more coherent and reduce extensive regulations.
Principled approaches to digital currencies can be less hindering and promote innovation. An approach based on principles and not specific rules would help regulatory organizations, like the CFTC, as it would ensure they’re always in the forefront of change. It also allows them to be more proactive in their reaction towards changes in technology and the market.
A principled approach towards the cryptocurrencies can make it easier for companies to comply with, and prevent the occurrence of loopholes. CFTC also identifies financial technology (FinTech) as another aspect where principle-based approaches are more utilitarian. The financial regulator believes that the United States has the potential to lead the world in FinTech, but restrained crypto regulations will only inhibit the growth of this significant market and disincentivize investors.
The aspect of principled approaches towards crypto regulations has been a topic of discussion for some time now. Industry insiders, financial regulators, and other crypto experts have made their stands clear on the topic.
Unfortunately, this is only a much talked about topic, since the CFTC and its sister regulatory body, the Securities and Exchange Commission (SEC) haven’t executed any measure in favor of the issue.
CFTC isn’t the only financial regulator, who’s been calling for an unhindered approach towards crypto regulations. A long-time commissioner of the SEC, Hester M. Pierce had criticized her organization, many years back, for its strict approach to industry rules. At the time, Pierce expressed her concerns that impeding regulations would result in the abrasion of innovation and ingenuity in the industry. She said that it would discourage companies with ingenious ideas to participate as well.
Despite crypto regulations being in the heart of all discussions, regulatory bodies have failed to execute any significant steps that will ease crypto regulations. On the one hand, the CFTC has continued to pursue the laid-back and lukewarm approach towards crypto regulations and only acts if a crypto-financial crime gets committed. On the other hand, the SEC is currently pursuing crypto projects, and it suspects them of being non-compliant with its own securities laws.
Last year, Telegram, a social media platform, was set to launch a new cryptocurrency, GRAM, token. The SEC impeded its launch and killed the cryptocurrency, due to some so-called illegal activities the platform’s development team indulged in. Now, the Commission has turned its focus to another social media platform, Kik, that is prepared to launch the KIN token. The SEC has continued to desist all applications for Bitcoin ETFs (Exchange Traded Funds), prohibiting companies from cornering the market. Such hindering approaches and regulations will only deter innovation and discourage new players. The earlier these strict crypto regulations get lifted, the faster the crypto market can grow.