Yet another former Commodity Futures Trading Commission (CFTC) official has said that setting regulation through enforcement is the wrong approach for the burgeoning cryptocurrency industry.
In an appearance on CoinDesk TV’s “First Mover” Friday, Brian Quintenz, who left the commodities watchdog just weeks ago and announced Thursday he has joined venture capital firm Andreessen Horowitz (a16z) as a part-time adviser, commented on the current regulatory action happening in the U.S. This includes the news another agency, the U.S. Securities and Exchange Commission (SEC), has threatened to sue Coinbase over a proposed lending product.
Deflating claims that the CFTC and its sister agency are engaged in a turf war, Quintenz said the federal agencies must work closely together to establish a comprehensive cryptocurrency framework.
“I don’t necessarily think applying 80-year-old laws to these kinds of dynamics are really the best way that the government can promote innovation, wealth creation and access to financial inclusion,” he said.
Quintenz is the latest former or current regulator to call for updating regulations. Policymakers are working to make sense of the crypto industry that, by design, overturns many established financial principles. This means fitting new tools into old paradigms, issuing guidance and, as what Quintenz hopes would be a last resort, establishing precedent through lawsuits.
In Coinbase’s case, the publicly traded exchange was reportedly in a dialogue with the SEC for months over what it was promoting as a savings account – offering 4% yields on USDC stablecoin deposits held with the exchange – before the agency threatened to sue. To the SEC the yet-to-be launched product looks more like a bond and thus a security, which is the regulator’s domain.
“Are those the laws that we would create now in response to any issues or problems or dynamics that currently exist? I would probably say no,” Quintenz said. He added that he is not a securities lawyer and does not know the particulars of the Coinbase case.
“We put forward guidance to try to provide clarity before we took an enforcement approach ... that’s the right way to look at innovation,” he said. “Setting policy through enforcement, in my view, is wrong.”
Guidance tells people what they can do, making it easier for them to know how to launch something compliantly, whereas enforcement only tells people what they cannot do, which does not help them be proactive about complying.
With the SEC having a crypto expert at the helm for the past few months, it appears the SEC and CFTC are fighting over turf. Last month, SEC Chair Gary Gensler stated that the vast majority of crypto assets would likely fall under the purview of his agency. Currently, only bitcoin and ether are decidedly commodities.
But Quintenz stressed the U.S. agencies have been working together for the benefit of the crypto industry and noted the personal relationships he forged with former SEC chief Joseph “Jay” Clayton and current Commissioner Hester Pierce.
“We’ve worked very constructively together to try to understand the innovation that was occurring in this space,” he said.
It’s up to incoming staff at the CFTC – there are now three senior vacancies for Congress to fill, Quintenz noted – to keep up this “coordination, communication and relationship” between the agencies and determine where their jurisdictions “overlap.”
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