Sherrod Brown: Cryptocurrency Space Is Rife with Fraud and Abuse

Kamal531

U.S. cryptocurrency legislation will depend on Senator Sherrod Brown, who reiterated his view on Tuesday, September 12th, that the industry is rife with fraudsters and abuses.

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), described the cryptocurrency industry as the worst-behaved he has seen.

While Gary Gensler was in the spotlight at the Senate hearing on Tuesday, the most significant cryptocurrency sentiment may have come from Senator Sherrod Brown (D-Ohio), who views most of the industry as dangerous scammers.

"The problems we see at FTX are everywhere in the crypto space - failing to provide real disclosure, conflicts of interest, and using customer funds for high-risk bets that should be safe," said Senator Brown, chairman of the Senate Banking Committee. The committee may have to agree to any cryptocurrency legislation to provide a regulatory framework for the industry. "FTX is the biggest and the ugliest."

Without Brown, it is unlikely that the stablecoin bill or a new blueprint for regulating the U.S. cryptocurrency market will emerge in the short term. The Ohio lawmaker praised Gensler's agency because the industry's complaints are about enforcement regulation.

"I'm glad the SEC is using its tools to combat abusive behavior and enforce the law," Brown said.

At the committee's regular SEC oversight hearing, Gensler reiterated his sharp skepticism about the industry.

"I've never seen an area as rife with misconduct as this one," Gensler said. "It's daunting."

Senator Cynthia Lummis (R-Wyo.), a reliable ally of the digital asset industry, asked him about the SEC's accounting bulletin, which suggests that publicly traded companies must keep cryptocurrency holdings on their balance sheets. The guidance, known as Staff Accounting Bulletin 121, tells public companies that if they handle cryptocurrency custody for customers, these assets must be reflected on the company's balance sheet. Lummis suggested that this could have a significant capital impact on banks, potentially forcing regulated institutions out of the business.

Gensler said that the SEC staff made the decision regarding cryptocurrencies because, unlike stocks and bonds, cryptocurrencies are not easily segregated. He said that the capital treatment of these cryptocurrencies was a matter for banking regulators.

Gensler's SEC, however, has not ignored cryptocurrency regulation entirely, opting instead for enforcement actions against companies like Coinbase and Binance. His agency has been seeking rule proposals that would have a direct impact on digital assets, although the effects typically involve requiring existing cryptocurrency businesses to comply with existing U.S. securities laws.

Congress, including some Democratic members who have historically aligned with Gensler, has been working on bills that would create specific rules for the industry, countering Gensler's view that existing law is sufficient. While two bills have been approved by the House Financial Services Committee, and some senators have proposed other options, Brown has not yet indicated a willingness to accept these bills.