Though Okcoin chief compliance officer Megan Monroe said that there are still certain grey areas over cryptocurrencies in the United States, further regulation may not be the best solution.
In a statement to Cointelegraph, Monroe said current U.S. regulations are sufficient to police cryptocurrency exchanges, token issuers and custody wallet providers, but “jurisdictional boundaries of these federal financial regulators are neither clear nor collaborative.” Rather, she advocated for a framework with greater clarity to determine which crypto firms should be subject to regulation and let investors know which protections are available.
“A clear regulatory framework with established jurisdictional boundaries, flexible compliance standards and open communication channels with registrants (as well as with state regulators) would be a good way to initiate an evolving framework for market participants to grow their businesses,” said the Okcoin chief compliance officer. “[This] would provide retail customers that seek to work with regulated entities a clearer understanding of the investor protections that would be available to them.”
“We do not believe that further regulation will necessarily prevent fraud and platform abuse [...] Fraud should not be limited to focusing on retail customer regulatory compliance issues in the securities markets."
Two of the major government agencies handling digital asset regulation in the United States, the Securities and Exchange Commission, or SEC, and the Commodity Futures Trading Commission, or CFTC, have different jurisdictional claims regarding crypto.
The SEC often determines whether tokens are securities using the Howey Test, with Chairperson Gary Gensler arguing the crypto industry, including decentralized exchanges, falls within the regulatory purview of the federal agency. Former CFTC chair Christopher Giancarlo has claimed that cryptocurrencies are commodities and thus would be subject to regulation by the government body. However, CFTC commissioner Dawn Stump told Cointelegraph "the CFTC does not regulate commodities, and thus it does not regulate crypto assets even if they are commodities."
The apparent lack of clarity can be seemingly confusing to crypto firms that are considering relocating to the U.S., or local ones making the transition to the digital space. David Schwartz, chief technology officer of Ripple Labs, told Cointelegraph earlier this year that it was “difficult to figure out which laws apply and how they apply to something new,” like cryptocurrencies or blockchain technology.
“Over time, the regulators have educated themselves about the industry and expanded their scope to incorporate new blockchain technology, such as decentralized exchanges and DApps,” said Monroe. “But, the regulations still lag behind the industry innovation, which is why the regulators have yet to provide comprehensive regulatory guidance on decentralized finance technology.”
The Okcoin chief compliance officer said that an “incubator” approach might be one possible solution to this “patchwork of financial regulations,” wherein crypto traders and businesses could operate without fear of legal action for a set period of time. She also encouraged projects to clearly identify the risks to both investors and users, and for greater communication and collaboration between agencies like the CFTC, SEC and Financial Crimes Enforcement Network.