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Regulators Racing Toward First Major Rules on Cryptocurrency

  • September 23, 2021

The Securities and Exchange Commission also could use its powers to demand that certain stablecoin issuers with reserves backed by securities — such as commercial paper, bonds or money market funds — register as securities, which would require companies to provide more disclosures to investors.

As Gary Gensler, the S.E.C. chair, has pointed out, the agency did just that with the mutual fund industry in 2016 after a major fund that relied on risky debt collapsed and had to halt customer withdrawals. Cryptocurrency, he told the Senate Banking Committee, demands similar action.

“Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted,” Mr. Gensler testified.

In an effort to keep the looming regulations from choking off the industry’s growth, industry executives have been fanning out to make their case to cabinet secretaries, Federal Reserve governors, key White House staffers and leaders in Congress from the Senate Banking and House Financial Services Committees, as well as financial regulators.

And crypto businesses and trade groups have been increasingly hiring lobbyists and former regulators to work on their behalf in Washington.

Companies and industry groups whose representatives have met recently with Treasury Department officials included top stablecoin issuers such as Tether, Circle and Paxos; cryptocurrency exchanges that are also stablecoin creators, like Coinbase and Gemini; and old- and new-school financial services companies like BlockFi, Mastercard and the Blockchain Association.

Industry executives argued in these sessions that cryptocurrency, relying in part on stablecoins, will help extend banking and payment services globally to billions of people who now have limited access to the financial system.

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