It feels like all eyes are trained on two courthouses in New York this week, as two men with (formerly) distinctive hair launch defenses against their alleged bad behavior. But just as the Elizabeth Holmes trial was not about Theranos' diagnostic testing, the SBF trial is not about crypto. It’s a tale as old as fraud.
The actions of a single person should not, and do not, serve as a barometer for the crypto industry. Sam Bankman-Fried is having a spectacular and ongoing implosion, and as this trial continues, we expect to see further evidence that Sam was out there primarily for himself.
In an ideal world, the focal point of the trial would be the harm to customers caused by the actions of a few. The cult of celebrity around SBF and the need for "a bad guy" storyline are parts of the problem.
Victims deserve more than headlines; they deserve restitution. And true remorse? That's not just a legal term; it's a moral imperative that must be visibly demonstrated.
It’s important to note that while other countries are watching this trial with the seemingly requisite ghoulish interest, they’re not seeing it as a referendum on an entire cryptocurrency industry or asset class. If we take a step back and look at what's happened outside the U.S. since the SBF news broke, other countries have doubled down on this tech. Governments around the world are actively building legislative and regulatory frameworks; offering important legal certainty to ecosystem operators and crucially, enhanced protection for consumers.
Earlier this year the EU put in place comprehensive legislation and is already iterating on it. The Markets in Crypto Assets Regulation (MiCA) is the first big piece of legislation from a leading economy to legislate digital assets and introduce a harmonized regulatory framework.
It lays out rules for the EU’s 27 member countries covering issuers of stablecoins (categorized as asset reference tokens or electronic money tokens), unbacked crypto assets, trading venues and exchanges (known as crypto asset service providers or CASPs). Decentralized finance (DeFi), non-fungible tokens (NFTs) and staking were all, sensibly, carved out of this piece of legislation, though the European Commission has a mandate to study and report back to legislators on these aspects before too long.
MICA was adopted in May 2023, with rules on stablecoins applying from the middle of next year and rules on CASPs from the end of 2024. In the meantime, more detailed technical rules, fleshing out the law, are being worked on by the European Supervisory Authorities and will be finalized before MiCA applies.
This progress can be seen in a consultation by His Majesty's Treasury, titled "the future financial services regulatory regime for cryptoassets," which concluded on April 30, 2023. The Treasury is expected to publish its response to the consultation in the coming weeks. A pivotal moment in this development came when the Financial Services and Markets Bill received approval at the end of June, enabling legislative changes that give regulators more oversight of cryptoassets.
Further, the Bill expands the scope of the Banking Act, and includes payment systems using digital settlement assets. This will include some stablecoin activities and could pave the way for a new regulatory regime. The bill also allows the Financial Conduct Authority (FCA) to oversee crypto asset promotions, with new rules applying from Sunday.
The government's ongoing goal is to establish the U.K. as a leading global center for crypto assets. This objective originated from statements made by the former Economic Secretary to the Treasury John Glenn in April 2022, and has been reiterated by the current EST Andrew Griffith. These aspirations have a significant impact on the speed and direction of policy-making.
Japan, which heeded lessons learned from a previous crisis and put consumer protections in place, has incorporated Web3 into its national economic plan. Additionally, in June this year, the Japanese Financial Services Agency (FSA) amended the Payment Services Act (PSA). The agencies wanted to update the country’s regulatory framework for stablecoins and crypto assets. This amendment revised the definition of crypto assets, included new guidelines for crypto asset exchanges, banking and travel rules, as well as a new framework for stablecoin issuers.
Crypto moves in the U.S.
Leaving aside SBF, a general lack of regulatory infrastructure and a default to deregulation have done little to deter antisocial behavior in the crypto industry. Humans are going to human, and the goal of regulation should be to disincentive bad behavior, make it very hard to get away with, and create a path to accountability and consequences when some try it anyway.
In the U.S., we appreciate the serious attention that some government officials are giving to crypto and blockchain technology.
We saw, among other developments, the formation of a new Subcommittee on Digital Assets, Financial Technology and Inclusion, a record number of bills voted on in the House and continued bipartisan interest.
Specifically, we saw the Financial Innovation and Technology for the 21st Century Act (FIT21) being passed out of both the House Financial Services and House Agricultural Committees. FIT21 would establish a comprehensive federal regulatory framework for digital assets in the U.S., while allocating needed oversight between the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC).
The Clarity for Payment Stablecoins Act, which provides for a regulatory framework for the issuance and oversight of payment stablecoins, also passed out of the House Financial Services Committee.
While progress is needed, many leaders recognize this technology cannot be put back in the box and will continue to evolve without the U.S.’s endorsement. Recent progress in the Congress reflects recognition of this fact and the urgency to provide regulatory clarity for a burgeoning and transformative industry.
See also: U.S. Lawmakers Can Get Crypto Regulations Right if They Act Now | Opinion
The trial in New York is expected to continue for four to six weeks. Simultaneously, back in the industry, the real building continues. As we all look ahead, it’s important to focus on the real work underway to help make the financial system more accessible and inclusive.
We’ve seen a large group of crypto tourists exit the industry. But, until we have a regulatory regime that provides clear, consistent and transparent guidelines in the U.S., there will likely be another set of individuals who want to see how far the boundaries can be pushed.