After Sam Bankman-Fried’s conviction, will cryptocurrency regulation gain traction?

Efforts to put guardrails on the cryptocurrency industry after the collapse of FTX and other exchanges last year have gone nowhere as lawmakers focus on other issues.

The conviction of former cryptocurrency mogul Sam Bankman-Fried for stealing at least US$10 billion from customers and investors is the latest black mark for the cryptocurrency industry, but in Washington, there seems to be little to no interest in pushing through regulation.

When cryptocurrencies collapsed and a number of companies failed last year, Congress considered multiple approaches for how to regulate the industry in the future. However, most of those efforts have gone nowhere, especially in this chaotic year that has been dominated by geopolitical tensions, inflation and the upcoming 2024 election.

Ironically, the failure of Bankman-Fried’s FTX and his subsequent arrest late last year may have contributed to the momentum for regulation stalling out. Before FTX imploded, Bankman-Fried spent millions of dollars — illegally taken from his customers it turns out — to influence the discussion around cryptocurrency regulation in Washington and push for action.

Without Congress, federal regulators like the Securities and Exchange Commission have stepped in to take their own enforcement actions against the industry, including the filing of lawsuits against Coinbase and Binance, two of the biggest cryptocurrency exchanges.

And most recently PayPal received a subpoena from the SEC related to its PayPal USD stablecoin, the company said in a filing with securities regulators Wednesday. “The subpoena requests the production of documents,” the company said. “We are cooperating with the SEC in connection with this request.”

Still, Congress still has yet to act.

Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark., proposed last year to hand over the regulatory authority over cryptocurrencies bitcoin and ether to the Commodities Futures Trading Commission. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over the CTFC.

One big stumbling block in the Senate has been Sen. Sherrod Brown, D-Ohio, chair of the Senate Banking Committee.