Former CFTC Chairman: SEC Must Create A New Industry Framework To Protect Investors

Key Points:

• Former CFTC Chairman Timothy Massad said that the government must build a new trading structure for crypto if the company is to survive.
• According to Massad, money laundering accounts for between 50% and 90% of crypto transactions.
• He said that he and Fed Chair Jay Powell have been calling for short-term measures to safeguard investors.

According to CNBC, Timothy Massad, former chairman of the US Commodities Futures Trading Commission (CFTC), said in an interview that the government’s recent litigation against cryptocurrency exchanges Binance and Coinbase will determine the future of cryptocurrencies.

According to Massad, the government and the Securities and Exchange Commission (SEC) must establish a new industry structure to safeguard investors, prevent fraud and manipulation, and ultimately address the contentious issue of whether digital tokens are securities.

“A lot of what goes on in the crypto world does just revolve around itself, you know, it’s a very interesting technology — the practical use cases that connect to the real economy, frankly, are still few and far between. The question is, how do we create a framework where that innovation can still take place, and maybe lead to things of real value, but protect investors at the same time,” Massad said.

One of the most serious problems in crypto is wash trading, which occurs when someone trades with oneself or affiliates to deceive others about stock performance. According to Massad, this fraud accounts for 50% to 90% of cryptocurrency transactions.

He went on to say that he and Federal Reserve Chair Jay Powell have been calling for short-term measures to safeguard investors as the government works to build a completely new framework model.

The SEC charged Binance, the world’s biggest cryptocurrency exchange, and its founder, Changpeng Zhao, with comingling billions of dollars in customer cash and sending them to a European business owned by Zhao.

The US Securities and Exchange Commission has launched a complaint against the New York-based cryptocurrency exchange Coinbase for marketing unregistered securities.

The complaint also claims that Coinbase has operated as an unlicensed securities broker since 2019, almost two years before its IPO in April 2021.

According to the SEC, Coinbase’s staking program comprises five stacking crypto assets, making it an investment contract and hence a security. Despite Kraken earlier settling with the SEC and shutting down its staking services in the United States, Coinbase was already conducting a staking dispute with the SEC, saying its staking products do not constitute securities.

According to some industry analysts, the SEC’s recent proceedings against US-based Coinbase and Cayman Islands-based Binance may be a net good for firms operating in the US long-term due to the legal clarity they may provide. Yet, in the short to medium term, these steps may push these companies to redirect their attention elsewhere.

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Harold

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