Law Decoded, Sept. 5–12: The pressure is growing in the US

While last week brought no troubles from the market side of the crypto industry – no operations frozen, no bankruptcies filed – the United States regulators made some explicitly negative statements

Recently appointed U.S. Federal Reserve Board vice chair for supervision Michael Barr pledged to “ensure that crypto activity inside banks is well regulated, based on the principle of the same risk, same activity, same regulation, regardless of the technology used for the activity.” In Barr’s opinion, people “may come to believe that they understand new products only to learn that they don’t.”

Michael Hsu, an acting Comptroller of the Currency at the annual conference of the Clearing House and Bank Policy Institute, mentioned stablecoins and the collapse of Terra as an example of crypto’s disruptive potential. He also noted that the relationship between banks and fintech companies is evolving rapidly and causing “de-integration” in the financial sector.

The White House Office of Science and Technology Policy has weighed in on the environmental and energy impact of crypto assets, focusing on their contribution to energy usage and greenhouse gas emissions. Among the broadly written recommendations are assessment and enforcement of energy reliability in light of crypto mining projects, setting energy efficiency standards and research and monitoring.

Enforcers participated in the collective push as well. Gurbir Grewal, the enforcement director for the Securities and Exchange Commission, promised the financial regulator will continue to investigate and bring enforcement actions against crypto firms, despite the narrative of “picking winners and losers” and “stifling innovation.” He pushed back against criticism that the Securities and Exchange Commission “somehow unfairly targeted crypto” in its enforcement actions.

Zuckerberg is called to address the ‘breeding ground’ of crypto scams on Facebook

In the United States, a group of Democratic senators has reportedly asked Meta CEO Mark Zuckerberg to provide details on the social media giant’s policies regarding cryptocurrency fraud. Six senators – Elizabeth Warren and Sharrod Brown, among them – called on Zuckerberg to explain actions the company may take to detect crypto scams, coordinate with law enforcement and assist victims of fraud. The senators are concerned that “Meta provides a breeding ground for cryptocurrency fraud that causes significant harm to consumers.”

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‘False and misleading claims’ by Celsius and its CEO 

The ​​Vermont Department of Financial Regulation accused crypto lending platform Celsius Network and CEO Alex Mashinsky of misleading state regulators regarding the firm’s financial health and its compliance with securities laws. According to a filing with the United States Bankruptcy Court in the Southern District of New York, the company and its CEO “made false and misleading claims to investors,” which allegedly downplayed concerns about volatility in the crypto market and encouraged retail investors to leave their funds on the platform or make new investments. 

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Crypto assets are no longer niche, according to IMF

In a new report from the International Monetary Fund (IMF), experts noted that crypto assets have firmly shifted away from being “niche products” to ones used for speculative investments, hedges against weak currencies and payment instruments. Along with recent failures of crypto issuers, exchanges and hedge funds, it has “added impetus to the push to regulate,” according to the IMF. However, regulators are still “struggling to acquire the talent and learn the skills to keep pace.” 

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