According to a March 18, 2019, working paper published by former Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad, the large gap in crypto-regulations in the U.S. has led to continual frauds and weak investor protection in the budding cryptocurrency ecosystem.
Lack of Regulations a Menace for the Industry
Regulations and compliance in the cryptospace have been a matter of much debate all over the world. Given the fact that digital currencies are barely a decade old phenomena, international financial watchdogs have found it hard to classify this emerging asset class under a broad regulatory umbrella.
In a paper titled “It’s time to strengthen the regulation of crypto-assets,” Massad stresses the need for clear and transparent crypto regulations. He mentions how clarity with regard to regulations can mitigate the risk of crypto being used to sponsor illicit activities and also reduce the risk of cyber attacks.
Decentralized cryptocurrencies such as bitcoin (BTC) transcend international boundaries and jurisdictions. As a result, regulatory bodies in the U.S. such as the Securities and Exchange Commission (SEC) and the CFTC don’t have complete authority or sufficient jurisdiction over them.
This lack of authority has, in turn, made cryptocurrencies a favorite among wrongdoers. Their presence in the legal grey area has encouraged criminals as well as fraudulent financial intermediaries to orchestrate predetermined crimes behind the veil of cryptocurrencies.
A number of crypto cyber-attacks have taken place in recent times where the hackers were able to successfully run away with investors’ money without ever having to pay for it.
In his paper, Massad argues that due to lax regulatory and compliance infrastructure for cryptocurrency exchanges and trading platforms,