Sen. Cynthia Lummis (R-WY) was one of several legislators who spoke at the April 26 Bitcoin Policy Summit, a one-day conference hosted by the Bitcoin Policy Institute.
During the event, Lummis told Grant McCarty, co-founder of the institute, that she and other lawmakers are working on revising the bipartisan Responsible Financial Innovation Act to address concerns from other members of Congress related to fraud and illicit activity. She said believes the bill is extremely important, because the U.S. is lagging behind many other countries in establishing regulatory certainty for crypto companies, and she fears the current regulatory environment will drive innovation out of the U.S.
"We want to make sure that the SEC (Securities and Exchange Commission) is involved, but not through enforcement actions—through the actual submission of information that can help a buyer, a consumer, make an informed decision," Lummis said. "Because of what happened with FTX and other companies, we're making a more robust penalty provision for illicit use and attempts to commit fraud on the consuming public. Part of what's driving us to continue to move forward is what's happening in the European Union, in the UK, in Switzerland in particular, in Australia as well. The EU is ahead of us."
Unless the U.S. establishes a clear regulatory policy, crypto companies will "vote with their feet," Lummis said, predicting an exodus to greener regulatory pastures in other nations.
"I don't blame you," she said. "You're going to go where there's a regulatory certainty...instead of waking up, finding out you're subject to an enforcement action by the SEC, when you thought you were in full compliance with U.S. law."
Lummis originally introduced the Responsible Financial Innovation Act last year alongside Sen. Kirsten Gillibrand (D-NY) with the goal of establishing regulatory guidelines for the crypto industry. Speaking to attendees of the CoinDesk's Consensus 2023 conference at the end of April, Lummis said she hoped a revised version of the bill would be completed in six to eight weeks, CoinDesk reported. "We are probably going to have a stronger section on national security. You will see a stronger cybercrime aspect to our bill," Lummis said.
While lawmakers have expressed concerns that crypto is used for criminal activity, Tigran Gambaryan, head of Financial Crimes Compliance at Binance, the largest crypto exchange in the world, said that's a common misconception. He explained in a video posted by Binance that the transparency of crypto transactions makes crypto a terrible avenue for laundering money.
“Cryptocurrency provides unparalleled transparency into the activity and allows law enforcement to do their work more efficiently,” Gambaryan said.
Coinbase, the largest crypto exchange in the U.S., was recently sent a Wells notice by the SEC, a letter notifying them of a potential upcoming enforcement action. Paul Grewal, Coinbase's chief legal officer, said in a blog post that Coinbase repeatedly tried to communicate with the SEC over matters of compliance, but the SEC was not responsive.
Grewal said in the post that Coinbase has been open and communicative toward the SEC over the last several years but has received very little communication in response. Last summer, the SEC asked Coinbase if it would be interested in registering with the SEC and laying out what a potential path for registration would look like, given that a path for crypto exchanges to register does not exist. Coinbase said it was absolutely interested in registering with the SEC and developed and proposed two different models for registration.
"We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none," Grewal said. He said the SEC also declined multiple invitations to provide feedback or raise questions about Coinbase's listing process.
Grewal said in the blog post, "If our regulators cannot agree on who regulates which aspects of crypto, the industry has no fair notice on how to proceed. Against this backdrop, it makes no sense to threaten enforcement actions against trusted public companies like Coinbase who are committed to playing by the rules. It makes even less sense to threaten enforcement actions unless an industry participant concedes that non-securities can be regulated by the SEC. That is for Congress to decide."
Some crypto companies have proactively shuttered their U.S. operations, such as Seattle-based exchange Bittrex, citing regulatory uncertainty. Bittrex CEO and Co-founder Richie Lai said in a March 31 announcement on the company's website that in the nine years since he and the other co-founders started the company, the crypto ecosystem has changed significantly.
"Regulatory requirements are often unclear and enforced without appropriate discussion or input, resulting in an uneven competitive landscape," he said in the post. Lai said that although he and the other co-founders "made great strides toward accomplishing our goal of maturing the crypto space," it was "no longer feasible" for Bittrex to operate in the U.S. He said they would shift their focus to "helping Bittrex Global succeed outside the U.S."
