The former head of the Commodity Futures Trading Commission (CFTC) said US banks need more regulatory clarity than the crypto industry, arguing that they risk falling behind the rest of the world.
Regulatory uncertainty could leave US banks behind
On Sunday, Chris Giancarlo, former head of the CFTC, discussed significant policy changes under the Trump administration that are driving crypto innovation in the US, including the Market Structure Bill.
In an interview for Scott Melker’s podcast “The Wolf Of All Streets”, the former head of the CFTC confirmed that the prominent stablecoin legislation passed last July, the GENIUS Act, was the “appetite” for crypto regulation, while the market structure project, known as the CLARITY Act, is the main part of the “plate”, but has changed.
For context, the CLARITY Act was put on hold for nearly two months after the Senate Banking Committee released its bill in mid-January. Numerous policies, including key restrictions on stablecoin issuers, have been criticized by crypto leaders, leading to a long-running battle between banks and the digital asset industry.
Giancarlo asserted that banks need more regulatory clarity than the crypto industry, stating that they would be hesitant to invest in new technology without clear rules and their systems being replaced.
However, banks cannot afford regulatory uncertainty. Their general counsels tell their boards that you cannot invest billions of dollars in this (…) unless you have regulatory certainty. (…) Banks need this clarity because they have to build it. They should be at the forefront of this innovation, not at the back.
Instead, the crypto industry will continue to build and innovate in other territories. “They take a risk. They either build it here or they build it overseas,” said the former CFTC chairman.
If the CLARITY Act is not passed, Giancarlo believes that the heads of financial regulatory agencies, such as the Securities and Exchange Commission (SEC) and the CFTC, will likely establish the necessary rules to oversee the sector.
“They won’t support legislation to make it work forever, or at least during the next presidential term, but it will work now. Now, it gives the industry the certainty they want? No. And who needs that certainty more than the banks? Crypto doesn’t need it. They were even building under Gary Gensler’s whip,” he said.
Are prospects interested in cryptographic regulation?
Giancarlo noted that digital asset legislation has become a political issue, pitting Republicans against Democrats and traditional finance (TradFi) versus decentralized finance (DeFi) and new technologies.
The former head of the CFTC also noted the problem of regulatory timing, stating, “If we couldn’t come at a worse time, we’re in an election year.” During this period, politicians are focused on the upcoming midterm elections, he elaborated, and “everything that happens in Washington (…) is all about swaying voters to the polls.”
Last month, Treasury Secretary Scott Besant urged lawmakers to pass the stalled bill this spring. He acknowledged the efforts of a bipartisan task force to advance the legislation, stressing that Democrats are ready to work with Republicans.
He also warned that the chances of a deal could be reduced if Democrats take control of the House in November, given the Biden administration’s strict regulations on industry.
Despite the delay, Giancarlo believes the odds are 60-40 in favor of the bill’s passage, stating that “there is a lot of good in the bill for all parties” and that its importance is recognized by all parties.
“I think this is the new architecture of finance and America, our financial institutions are the dominant financial institutions in the world. We have to modernize it. We have to embrace this technology,” he concluded.
The total crypto market capitalization is at $2.31 trillion in the one-week chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, Chart from TradingView.com
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