By Michelle Price
WASHINGTON (Reuters) – Regulators around the world are cracking down on cryptocurrencies, alarmed by a rapidly expanding market that surpassed a record $ 2 trillion in April. China said on Friday that it was banning all cryptocurrency trading and mining, causing digital currencies to plummet.
Global regulators are concerned that 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.
In the United States, President Joe Biden’s regulators have launched various efforts to control cryptocurrencies. Here’s the breakdown:
THE CHAIRMAN’S WORKING GROUP ON ESTABLISHMENTS
The President’s Task Force on Financial Markets, which includes leading financial regulators, focuses on stablecoins, a type of digital currency pegged to traditional currencies.
The group traditionally includes the Department of the Treasury, the Federal Reserve, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), but the Federal Deposit Insurance Corporation (FDIC) and the Bureau of the Comptroller of the Currency (OCC) are also involved.
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. Subsequently, Treasury Secretary Janet Yellen said that the government must act quickly to establish a regulatory framework for stablecoins.
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 -cryptocurrencies-stablecoins-2021-09-10.
The group is expected to release a report detailing the risks and opportunities of stablecoins in the coming months.
US SECURITIES COMMISSION
The main stock is coming out of the SEC. In Senate testimony this week, SEC Chairman Gary Gensler said the agency was examining cryptocurrencies in several areas: the offering and sale of crypto tokens; cryptocurrency trading and loan platforms; stable value coins; investment vehicles that provide exposure to crypto assets or crypto derivatives, and custody of crypto assets.
Gensler’s SEC also appears to be adopting 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 traditional guardians of finance such as banks and exchanges, fall within the purview of the SEC.
The agency filed its first DeFi-related enforcement action https://www.sec.gov/news/press-release/2021-145 last month.
FED CENTRAL BANK DIGITAL CURRENCY PROJECT
The US Federal Reserve is due to release a highly anticipated report shortly exploring the possible 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.
While the Federal Reserve is undecided about creating its own digital currency, many lawmakers in Washington see it as a critical step in combating the rise of privately operated digital currencies.
BANKING REGULATORS ” SPRINT TEAM ‘
In parallel, a small group of senior staff from the Fed, OCC and FDIC have been collaborating on a “crypto policy sprint” focused on cryptocurrencies in relation to the banking sector.
OCC Acting Director Michael Hsu has said the group’s goal is “to agree on definitions, use cases, risks and gaps, and to discuss policy options related to digital assets.”
As part of that effort, the OCC is also reviewing a decision by the agency head under Trump that allowed national banks to provide custody of cryptocurrencies.
(Reporting by Michelle Price; Editing by Steve Orlofsky)