The competing priorities facing U.S. crypto regulations
BrookingsJan 13, 2023
On Monday, the US Commodities Futures Trading Commission (CFTC) sued Binance, the world's largest cryptocurrency exchange, and its CEO, Changpeng Zhao, for allegedly violating US trading and derivatives laws by operating an illegal exchange and a sham compliance program.
The CFTC's lawsuit — filed in Chicago federal court — accuses Binance, Zhao, and a former compliance executive of wilfully skirting US laws as a "calculated strategy of regulatory arbitrage to their commercial benefit."
Current regulation on illegal crypto industry activity is not working, which is why the focus must be shifted to combating illicit uses of cryptocurrency in circulation before new forms of virtual currencies are allowed to be introduced. Theft, fraud, and extortion can all be prevented by implementing a central bank of digital currency, but the flow of cryptocurrency to criminals — which should be the focus of continued intervention in the market — can be mitigated by keeping an up-to-date and easily accessible list of the bad actors brokering the transactions.
Crypto is not the dollar, so traditional regulations are merely increasing the volatility of the crypto market, rather than giving the government its desired regulatory power over exchanges. To keep the market stable, the US needs to introduce decentralized blockchain tech — it would improve transparency, thereby protecting users, and make the markets, effectively, self-regulating. Rather than making endless attempts to impose an irrelevant system of regulation, the government should respond to the problems of crypto with a solution tailored to the technology.
There's a 37% chance that Binance or a subsidiary will file for bankruptcy or be sold "under duress" before 2024, according to the Metaculus prediction community.