CRYPTO MOVERS AND PRICES
Crypto was for the most parti unchanged this morning. Spot volumes have nose-dived again at only about 50% of the 30-day average.
CRYPTO STORY OF THE DAY
CFTC chair Heath Tarbert has released a paper highlighting the commission's take on "principles-based regulation” versus “rules-based regulation.” In the essay, he notes that principle-based is the most appropriate framework for crypto regulation.
The paper, “Rules For Principles And Principles For Rules: Tools For Crafting Sound Financial Regulation,” appeared in the Harvard Business Law Review. The piece gives a comprehensive overview of the CTFC, the characteristics of principle vs rules-based regulation and the agency’s perspective.
Tarbert suggests that over time the CFTC has often found the principles-based approach to be more appropriate and gives examples. He cites the CFTC's approach to automated trading as principles-based, their approach to position limits as rules-based and to cross-border regulation as a principles/rules-based hybrid. The 4th example he gives, which is more prescriptive, focuses on digital assets where Tarbert notes, “Emerging technologies and related market developments are prime areas for taking a more principles-based approach to regulation to permit a period of development and observation. It is my view that the United States must lead the world in this technology, and applying overly prescriptive rules could stunt the development of this important market.”
This is the first crypto headline from Tarbert since he took a step back from what was initially a strong stand on the status of ethereum (ETH) as a commodity. In his first interview as the new CFTC Chair, Tarbert had said that he believed ETH to be a commodity. Several months later he took a step back after considering the Ethereum network's move to proof-of-stake and the implication that would have for ETH.
Nonetheless, Tarbert has been quite clear that the CFTC is comfortable regulating crypto if the SEC continues to not label the assets as securities.
We applaud Tarbert for recognizing the different needs of potential crypto regulation over those in traditional finance. That said, a comprehensive regulatory framework seems far from a reality in the U.S. and the question of whether or not an agency will be able to effectively regulate the space at all remains unanswered.