Why is the structure of the US financial system will not allow the regulators to develop a common approach.
A number of state bodies and their very different positions in respect of cryptocurrency can lead to regulatory arbitrage — a situation where companies find loopholes to benefit from differences in regulation in different jurisdictions.
Over the last several months, two state institutions of the state of new York- the Prosecutor General’s office and the Department of financial services — made comments and introduced provisions in relation to the industry of digital currencies.
The Commission on securities and exchange Commission (SEC), the United States is addressing most of the issues of regulation of cryptocurrencies at the Federal level. But experts are beginning to wonder whether will damage a fragmented approach to the regulation of well-functioning control systems.
“At the Federal level, there are regulators of all sorts, and their jurisdiction in some overlap. Moreover, we have a parallel system of state and Federal regulation, again with a mix of jurisdictions,” says David Yermack, a Professor at new York University. He continues:
“In the U.S. system there are many weaknesses, including high costs, regulatory arbitrage and the struggle between agencies for influence. Cryptocurrency contributed to the manifestation of all these problems — not the first nor the last time.”
Discussion on the issue of jurisdiction came to the fore in September when after the release of Initiatives to ensure the integrity of virtual markets CEO and co-founder of the crypto currency exchange Kraken, Jesse Powell accused the attorney General of new York Barbara underwood and her office is that they go beyond their authority.
In the report of the General Prosecutor’s office stated that cases Kraken and the other two exchanges are transferred to the new York Department of financial services to investigate potential violations of laws regulating the virtual currency in new York, because there is a suspicion that the sites made illegal transfers from the state — Kraken denies it.
The portal MarketWatch addressed to the office of the attorney General of new York with issue of cooperation with the SEC during the examination of the facts and received no response.
Felix Chipkevich, legal Director of the company Shipkevich PLLC, noted that the gaps in regulation exist, and if the situation will be fixed at the state level, without adjustment, to manipulate the jurisdictions will become even easier.
“New York differs from other States, lacking the resources to control the situation, which naturally contributes to the spread of regulatory arbitrage,” says Lipkewich.
Nine days before the report of the Prosecutor General uncertainty about the distribution of spheres of responsibility for regulation between the authorities once again became apparent when new York’s Department of financial services approved the launch is pegged to the US dollar at a ratio of 1:1 steilacoom Gemini and Paxos.
Paxos when asked a question, whether conducted on their part in dialogue with the SEC to obtain approval from the Department of financial services, CEO and co-founder of Paxos Chad Cascarilla said: “our lawyers have the impression that dialogue is not needed.” He added that Paxos is organized as a trust company, that is, they are subject to the Department of financial services.
When MarketWatch asked the Department consulted the staff of the Commission on securities and stock exchanges or the Commission on trade in commodity futures before taking a decision on these stabilium, the Department responded that it “does not comment on the review process”.
Meanwhile, the Commission on securities and exchange Commission rejected a number of bids for the bitcoin ETF, one of which was presented to the Gemini Trust.
Attempts to introduce regulatory clarity from the inside out has moved forward in early September with the founding of the Association of the blockchain. The consortium includes some of the most influential representatives of the cryptocurrency ecosystem, and its activities will be devoted to the promotion of the interests of the industry for its further development.
“The right step for the government would be the adoption of a unified approach to the regulation of crypto-currency assets, but given the complex structure of our financial system, I wouldn’t hold out too much hope,” says Yermack.
If you have just started exploring the world of cryptocurrencies, welcome to the School of trading AMarkets: everything the beginner needs to know about the cryptocurrency market and basics of investment.
Subscribe to our channel in Yandex.Zen. Not only the crypt but also many exclusive stories, useful information and beautiful photos.