Former CFTC Chair: Crypto Regulations Must Not Wait for Litigation, Standards Needed Today

A crackdown on the crypto industry in the US should not wait for litigation in courts to conclude, but instead move forward with temporary restraints while the courts do their work, a former regulator has said.

Speaking with CNBC on Monday, Timothy Massad, former chairman of the Commodity Futures Trading Commission (CFTC) said that enforcing current laws is no longer enough to reign in crypto, and that new “standards” are needed.

“We strongly support enforcement of the laws, but what we’re saying is, we need more than that, and the reason is twofold,” Massad said, before explaining:

“One is, litigation takes a long time and, quite frankly, the crypto industry may find it’s in their interest to stretch these cases out, because they may be hoping for a change in regulatory attitude with the 2024 election. The second reason is, it won’t resolve all the issues that we need to get resolved.”

Are cryptocurrencies securities?

Commenting on the hot issue of whether crypto should be considered securities for regulatory purposes, Massad said that while that is “an important question,” there are other more pressing issues.

“Let’s not get hung up on that,” he said, before adding “let’s have a parallel track which says, regardless of the classification issue, we need standards today.”

In the interview, the former CFTC chair also argued for the formation of a self-regulatory organization for the crypto industry through a joint initiative by the CFTC and the Securities and Exchange Commission (SEC).

According to Massad, the idea with such an organization is that it can develop some basic standards in areas like asset protection, fraud prevention and conflicts of interest, as well as certain reporting requirements for crypto exchanges and trading platforms.

Such a solution could be a way to get some basic industry standards in place without needing to first rewrite securities laws, which is a cumbersome process, Massad explained.

“[…] when you get into rewriting the securities laws or the derivatives laws, you risk creating, you know, a lot of unintended consequences, a lot of loopholes that you didn’t mean to create,” Massad said, before finally noting:

“This is a way to get investor protection standards into the industry as it exists today without having to fundamentally change the securities or the derivatives laws.”

Watch highlights from the interview with Timothy Massad on CNBC below: