SEC chairman Gary Gensler expressed enthusiasm for cooperating with lawmakers on Capitol Hill yesterday at an industry conference, saying that he was looking forward to expanding the CFTC’s authority over cryptocurrencies as part of the proposed legislation.
Gensler stated that in order for the commission to regulate the market, it would require additional authority.
He was quick to clarify that any new supervision should not diminish his own SEC’s jurisdiction. To supervise cash markets for some digital assets, the CFTC would require legislative changes to its current authority, which only allows it to monitor derivatives.
Obviously, a funding boost would be required to accomplish such a goal. There is a lot of support at the moment for letting the CFTC regulate cryptocurrencies like Bitcoin and Ethereum.
If we assume that, with Gensler’s approval, Bitcoin and Ethereum would ultimately fall under the CFTC’s jurisdiction, there are still many unanswered problems.
Rather than cryptocurrencies themselves, exchanges and custodians may need the most immediate regulation. For instance, a regulator is urgently required to verify that digital asset exchanges adhere to KYC and AML requirements.
A regulator must determine whether exchanges should collect more information to combat money laundering, the funding of terrorism, and the distribution of illegal drugs.
In addition to financial rules, problems exist over technical regulation. Currently, nine-figure hacks are occurring much more often than the business can tolerate in the long run.
With the surge of cybercrime emanating from hacker organizations supported by nation-states like North Korea, exchanges are seeing greater action. Open-source code provides hackers with practically limitless opportunities to uncover vulnerabilities in the technical stack of an exchange.