Cryptocurrency regulation has been widely reported lately and the government is beginning to crack down.
Key Details
- Many leaders have called for crypto regulation and the government is beginning to put strategies into place.
- Cryptocurrencies have been around for years and remain largely unregulated by the federal government—leaving investors without key protections from fraud and market manipulation.
- Lawmakers are working to rein in the unstable market and attempt to protect investors.
Why it’s important
Cryptocurrencies have taken off with little regulation—until now.
In August, a U.S. Senate committee proposed legislation that would assign oversight to some of the largest cryptocurrencies.
The committee is planning to introduce a bill that will authorize the Commodity Futures Trading Commission (CFTC) to control spot markets for digital commodities, a new asset. Right now the CFTC has authority to regulate derivatives, such as futures and swaps, rather than underlying commodities.
Now, a Treasury-chaired council charged with flagging risks to U.S. financial stability has said the crypto industry poses several risks, according to Axios writer Brady Dale.
The report from the Financial Stability Oversight Council this week is the latest response to President Biden’s executive order, “Ensuring Responsible Development of Digital Assets.”
The report explains that cryptocurrencies do not have a consistent or comprehensive regulatory framework which remains a threat to traditional institutions and it calls for regulation.
Overall, crypto is still a relatively murky market and without regulation could cause big problems down the road.
Making a celebrity example
As the government becomes more strict on crypto regulations rules must be followed.
One rule set in place is that if celebrities endorse cryptocurrencies they must disclose how much they were paid to do so. Americans follow celebrity endorsements, so when rich celebrities say they have invested in something—people follow suit.
Kim Kardashian was one celebrity who fell victim to this rule. She posted an Instagram story encouraging her over 250 million fans to invest in EthereumMax.
Kardashian did post #ad on the post, but did not disclose that she was paid to promote it leaving her with a hefty lawsuit.
Her failure to disclose the payment was a violation of federal securities laws, the SEC said. She agreed to pay $260,000, which includes the payment she received, plus interest, in addition to the $1 million penalty, the agency added.
“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” says SEC chair Gary Gensler.