One regulator to rule them all – we may all know this parody of a line from Lord of the Rings, but right now, that’s what’s happening in the United States in reference to cryptocurrency and regulation. A recent statement from a NYU professor brought this aspect of regulation to the attention of the public. The consensus? Not good. This turf war was described as a rivalry between different regulators, with all of them wishing to establish dominance in regulating cryptocurrency and blockchain technology.

 

Why might this be the case? Well, the US is under a lot of pressure when it comes to establishing a functional regulatory body. However, this also allows for a turf war, since the dominant regulator has yet to be determined. NYU Professor David Yermack stated recently that the US currently has quite a few regulatory agencies at the federal level. All of them are trying to bring in their own regulations to the crypto industry, but the problem lies in the overlap of jurisdiction. This issue is further compounded by state regulations, therefore, more questions of jurisdiction between state and federal agencies.

 

A good example to see what Professor Yermack meant is to look at what happened in New York recently, with the New York Attorney General’s office and the Department of Financial Services (DFS) both introduced regulatory decisions regarding the crypto world. These are just two different departments. What about the US SEC who is responsible for leading regulatory decisions at the federal level? What happens then?

 

Professor Yermack claims that the US system shows a lot of weaknesses when it comes to crypto currency. They include regulatory arbitrage, high costs, and even competition among different agencies. It’s quite possible that these weaknesses will be noticed by India when they allow crypto back into their country. Should regulations be strengthened? Let us know! What do you think the US should do to address these weaknesses, if anything?

 

Jurisdiction is a hotly debated issue even outside of cryptocurrency. This was a hotly contested point brought up by Jesse Powell, the co-founder and CEO of crypto-exchange Kraken. Powell accused Barbara Underwood, the NY Attorney General, as well as her entire office, for operating outside their jurisdiction. This was due to the fact that the NY AG’s office conducted an in-depth look into the exchanges. Some of these exchanges (including Kraken) refused to cooperate.

 

The NY AG office then referred Kraken and two other exchanges of potentially violating the state of New York’s regulations regarding cryptos. The reason for the referral is based upon the belief that Kraken and the other two exchanges may have accepted trades made by individuals within the state of NY.

 

Kraken continues to deny this referral and the claim it insinuates, based upon the fact that Kraken does not operate in NY. It is not yet known where the NY AG’s office received this information from – they were asked to clarify as to whether or not they collaborated with the SEC during their fact collecting, something that they have not responded to.

 

Shipkevich PLLC’s principal, Felix Shipkevich, also commented on the situation, stating that the regulation gap exists. He also believes that skirting around regulations will become easier and more commonplace if and only if regulation remains at the state level. Do you think this will stay at the state level? Or will jurisdiction be kicked up to the federal level? Let us know on our Facebook page here.

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