- The cryptocurrency market can be guided by the US's existing financial regulatory framework, former SEC chair Jay Clayton said.
- In an op-ed that he co-wrote with Brent McIntosh, Clayton lays out how financial regulators should deal with the digitization of assets.
- They note there's a risk of both overregulation and underregulation.
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Former SEC chair Jay Clayton and former undersecretary of the Treasury Brent McIntosh co-wrote an opinion article in the Wall Street Journal where they explained that the cryptocurrency market can be governed using existing financial regulation.
In the op-ed, titled: "Crypto Needs Regulation, but It Doesn't Need New Rules," the two question Treasury Secretary Yellen's suggestions that the US framework isn't "up to the task of regulating cryptocurrencies."
Instead, they said that the core ideas in the US's existing regulatory framework are enough to guide the market. Clayton and McIntosh note that there's a risk of both overregulation and underregulation in the budding industry.
"Policy makers would be wise to ground their efforts in the principal objectives underpinning existing financial regulations: financial stability, deep and efficient funding markets across the spectrum of debt and equity, and the prevention of fraud and illicit activity," they said.
Yellen isn't the only government official calling for more cryptocurrency rules. Clayton and McIntosh also note that current SEC chair Gary Gensler has lamented that because cryptocurrency exchanges lack a market regulator, there's "no protection around fraud or manipulation."
"Financial regulators and economic policy makers need to set out an agreed-upon plan to deal with the digitization of assets and financial technologies that is based on the current regulatory framework," Clayton and McIntosh added.
The effort should address at least three issues, they said. First, clarity on which regulators will regulate which types of digital assets. Second, clarify on the requirements a digital asset must meet to operate legally in the US. And third, an answer to whether the US should issue a digital dollar or facilitate digitization through other means like stablecoins.
The writers concluded that a prompt and coordinated approach to regulatory clarity that builds upon our existing knowledge base will empower "responsible innovation" and preserve the US financial system's role as a leader in capital formation.