Speaking at the American Bankers Association summit in Washington, US Senator from Maryland, Angela Alsobrooks, spoke bluntly to a room full of community bankers, warning them that the CLARITY Act will likely make everyone “a little bit unhappy.”
The warning comes as the CFTC and SEC have officially announced a collaboration that will eliminate the compliance-heavy environment that forced small firms to shut down.
The partnership will ensure that innovation is not driven out of the U.S, as the CFTC also outlined a focus on protecting prediction markets from state-led lawsuits.
Why would the CLARITY Act make bankers unhappy?
Senator Angela Alsobrooks warned an audience of community bankers at the ABA summit in Washington that the CLARITY Act, the bipartisan bill she is leading with Senator Thom Tillis, will likely make everyone “a little bit unhappy.”
Why? Because bankers worry that if it becomes too easy and safe for people to move their money into stablecoins or digital assets, they will empty their traditional savings accounts. Some estimates suggest as much as $500 billion could leave the traditional banking system by 2028.
The banking sector wants the bill to ban cryptocurrency platforms from paying users interest or giving out rewards just for letting their stablecoins sit idle in a wallet. The cryptocurrency industry rejected this handicap, saying it creates a competitive disadvantage.
Senator Alsobrooks’ compromise is to allow stablecoin issuers like Circle and Ripple to offer rewards if they are tied to specific actions like making a payment, providing liquidity to a market, or using a specific app.
SEC and CFTC partner to advance digital asset industry
At the Futures Industry Association (FIA) event in Boca Raton, Florida, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) announced a historic partnership.
Under the Project Crypto Initiative, both agencies are now committed to protecting market integrity without driving American innovation offshore.
The Project Crypto Initiative has established a formal cooperation framework between SEC Chairman Atkins and CFTC Chairman Selig that focuses on three primary pillars: a unified crypto taxonomy, substituted compliance, and data reform.
The unified taxonomy is a guidebook that helps market participants understand if their product is a security, a commodity, or a hybrid.
By removing the guesswork, the agencies aim to encourage domestic builds. Furthermore, the partnership includes a substituted compliance model that saves firms registered with both the SEC and CFTC from having to navigate two sets of nearly identical but slightly different rules.
The agencies are currently revising a critical reporting tool for private funds known as Form PF. The goal is to calibrate data collection so that it only monitors for systemic risk, rather than collecting excessive information that could be vulnerable to cyberattacks.
The CFTC Chairman Selig, speaking in his home state of Florida, explained that his agency is providing new guidance for developers of digital wallets and decentralized finance (DeFi) apps.
The goal is to clarify that simply writing software code shouldn’t necessarily force someone to register as a financial middleman and, hopefully, encourage developers to build their projects in America rather than moving offshore to avoid legal trouble.
Why is the CFTC getting involved in prediction markets?
The CFTC is using a back-to-basics strategy that involves redirecting resources away from political projects and toward its core concerns like market integrity, customer protection, and price discovery.
The commission formally disavowed the 2020 Climate Risk report and officially dismantled its Climate Risk Unit. It also withdrew a 2022 request for information on climate-related financial risk.
The commission stated that climate risk is already addressed through existing authorities and does not require special separate regulations.
The commission is prioritizing the expansion of prediction markets that allow participants to trade on the outcome of future events, like elections.
Prediction platforms are considered to be truth machines that gather information more accurately than traditional polls or media outlets. During the 2024 election cycle, they showed the changes in voter sentiment that pollsters missed.
The CFTC is asserting its exclusive jurisdiction over these “truth machines” as a way to protect them from several states that have filed lawsuits against them.
There have also been attempts by other jurisdictions to ban or heavily restrict them. The commission is currently drafting a formal framework to ensure these markets are transparent and free from manipulation.
Source: https://www.cryptopolitan.com/everyone-unhappy-with-us-crypto-regulation/
