US President Joe Biden
(Picture: AP)Crypto firms came under renewed scrutiny today as the Biden administration announced a fresh set of proposals to crack down on fraudulent activity in the digital asset market.
Under the proposed framework, the US Congress could impose a legal requirement on crypto exchange platforms to report suspicious transactions to regulators, by extending rules that currently apply to banks under the Bank Secrecy Act. Fines for unlicensed money transmitting are set to increase, while those involved in crypto theft could be prosecuted in any jurisdiction in which a victim is identified.
The move is part of a wider clampdown on the activities of crypto firms after billions of pounds of retail investors’ holdings were put at risk amid a string of recent insolvencies. At least 10 crypto firms have gone bust or have suspended withdrawals since the beginning of the year, after the Bitcoin price fell 49% since January, with one analyst warning of a 2008 financial crash-style “domino effect” in the crypto market resulting from “institutions taking illogical risk, largely at the expense of investors.”
US treasury secretary Janet Yellen said: “Innovation is one of the hallmarks of a vibrant financial system and economy, but as we’ve painfully learned from history, innovation without adequate regulation can result in significant disruptions and harm to the financial system and individuals.”
It comes after the US markets regulator, the Securities and Exchange Commission, said companies that hold cryptocurrencies on behalf of investors should account for them on their books as liabilities, reflecting the “significant increased risks” of safeguarding digital assets compared with traditional asset classes.
Viktor Prokopenya, founder of cryptocurrency exchange Currency.com, said the crypto market “needs to shed its wild west image and mature as a financial framework in its own right. About 10 per cent of the population of developed countries now hold cryptos, and this is worth hundreds of billions of dollars - which could disappear at the drop of a hat without regulation.”
“We can expect regulation to promote consumer and investor protection, market integrity, and financial stability, leading to increased legitimisation of the sector. We must not fear it, but instead, embrace regulation as the next stage of crypto development ends.”
