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U.S. Regulators Grapple with Booming Crypto Industry

By on December 18, 2021

SEC Struggles to Oversee Digital Currencies 

As demand grows for cryptocurrency-based investments in the United States, federal government regulators have barely been able to keep pace with developments in this burgeoning financial sector and are grappling with the oversight of initial coin offerings (ICOs) without stifling a blockchain market that has been thriving worldwide. 

Hester M. Peirce, a commissioner on the U.S. Securities and Exchange Commission (SEC), said during a Puerto Rico Blockchain Trade Association conference last week in San Juan that as a greater number of financial institutions address the demand from customers for cryptocurrency-based investment products, the government will have to figure out which crypto assets are being traded as securities for regulatory purposes. 

Peirce, an appointee of President Trump, said that the federal government is still figuring out a regulatory framework for cryptocurrency securities, which she stressed is difficult to achieve given the decentralized nature of such transactions. 

At the same time, many states such as Wyoming and Texas have set up their own industry regulations designed to encourage digital currency investments.

“In 2022, that will be a big theme because more and more financial institutions are getting asked by their customers how to get exposure to crypto,” the official told an audience of about 400 people attending the conference at an Isla Verde hotel. 

During the conference, several cryptocurrency investors and owners of blockchain firms questioned why the SEC has approved a futures bitcoin exchange-traded fund (ETF), but not a spot ETF, and has imposed on cryptocurrency funds “exclusionary rules” such as the accredited investor rules.

One trader acknowledged that the rules have protected “a lot of people from harm but [have] excluded the very types of investors we are trying to include for massive gain and wealth opportunities.” 

Crypto investors stressed that countries such as El Salvador, which last month announced it was going to issue bonds that would be related to bitcoin to finance infrastructure, are ahead in developing an established cryptocurrency market. Peirce said that these cases could “have an effect on how crypto is regulated in the United States and inform the landscape of what we are dealing with,” moving the U.S. Congress to act on these issues. 

Editor’s note: This report was first published on Dec. 16, 2021, issue of Caribbean Business.

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