Former U.S. Securities and Exchange Commission Chairman Jay Clayton recently gave an interview discussing the state of crypto regulations in the country. Many top companies in this industry have been asking for a robust framework from authorities in the U.S., but the SEC and others might be under-delivering.
Speaking at CNBC’s Squawk Box, Clayton spoke about the “frustration” around crypto regulations and the reasons why the U.S. have failed to address the nascent industry. The Former SEC Chair said:
Why is this so hard? There is a number of factors and I think if we understand those factors, we are going to do a better job of moving forward which we need to do (…). The technology underlying crypto revolution is going to come to finance, it’s so compelling that it’s going to come (…).
One of the reasons why the U.S. has failed to implement a regulatory framework for digital assets, Clayton said, is “pure emotion” from regulators and crypto companies. The former SEC Chair argued that there has been “plenty of fraud” in the nascent industry, non-compliance, and “lots of lawsuits”.
The current SEC Chair Gary Gensler has often compared cryptocurrencies with “The Wild Wild West”, a time in the history of the U.S. when people live outside of the law. Thus, the regulator has tried to push for new rules, tried to expand its jurisdiction to oversee all digital assets classified as securities, and has entered into controversy with its sister agency, the Commodities and Futures Trading Commission (CFTC).
Talking about the “Turf War” between the two agencies, the Former SEC Chair commented:
You are absolutely right (on the “Turf War”) on both of those things. One of those I called the “Uber Effect”, which is basically Uber came in and say, “the taxi cab regulation is so arcane, so dated, we are just going to offer a compelling consumer alternative”. The problem with that is, you can’t give up the core of our financial regulation (…).
According to Clayton, there is a discrepancy between current regulations, focused on institutions and national markets, and crypto, a product with global reach. One of the first things regulators must achieve to address crypto is “regulatory coordination”.
In the nascent industry, regulations on stablecoins could be agreed on relatively fast, as Clayton believes actors in the regulatory and crypto landscape would be able to negotiate them “easily”. This would allow payment rails in the U.S. to improve from this integration.
In one of the comments for the interview, John Deaton, a lawyer representing over 200 hundred XRP holders, accused Clayton of halting innovation and “missing an opportunity”. Deaton said to the Former SEC Chair:
You were Chairman and Elad Roisman and Hester Peirce were crypto-friendly compared to others (including you). Instead of fostering innovation, you fostered an environment of regulatory uncertainty.
In December 2020, Clayton left the SEC pushing a lawsuit against Ripple and two of its executives for allegedly selling an unregistered security, XRP. This has negatively impacted XRP holders.
During his time in the SEC, Clayton was considered an anti-crypto Chair that rejected a number of proposals to integrate the nascent asset class with legacy finances. Deaton added:
Now, you’re landing jobs to serve as an advisor to help companies navigate the uncertainty. It seems as though you’re benefitting from the lack of clarity you helped create. As for your op-ed – The Peculiar Challenges of Crypto Regs, I guess you weren’t up to the challenge.
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