Here are some of the biggest regulatory stories in crypto this week.

Warren speaks of need for crypto regulation

Senator Elizabeth Warren, who has in the past been critical of crypto, said this week she is “willing to collaborate” with the crypto industry, but only if it takes on rogue states, traffickers, and scammers.

In May 2023, Senator Warren called out crypto’s role in fueling the fentanyl crisis and announced she would reintroduce her bipartisan Digital Asset Anti-Money Laundering Act, a bill that would close loopholes in anti-money-laundering rules.

She has since said that both crypto and stablecoins pose threats to American consumers. “My view is the same kind of activity with the same kind of risk should have the same kind of regulation,” Warren told Bloomberg this week. “If you are part of the financial system moving around literally billions of dollars … law enforcement [needs] the same tools it has anywhere else, to shut down the terrorism drug traffickers and scammers.”

As she runs for her third term in office, Warren faces a challenge from Republican John Deaton, a former US marine and cryptocurrency attorney. Deaton is positioning himself as an underdog who grew up with a single mother on welfare. He has said he is intrigued by cryptocurrency’s ability to help the underprivileged and unbanked.

Peirce says fractured SEC should be mindful of its role

Speaking at an event in Denver this week, Commissioner Hester Peirce answered a Q&A on the SEC’s crypto stance.

Prefacing her words by saying the views expressed were her own and not those of the SEC or other commissioners, Commissioner Peirce said the SEC was fractured and the regulator’s role was not to tell people if crypto was good or bad, but let the market decide. “The government is supposed to work for the people and that’s a fundamental American principle.”

“If you’re not willing to tell people what a security is, it seems very unproductive to go in after the fact and start picking people off for not having registered.”

Commissioner Peirce, SEC

The SEC remembering its role is more important than a staff turnover or change of commissioners, Peirce believes.

Peirce added that the heavy emphasis on enforcement is a mistake, and that the SEC should not go after people asking for clear rules on how they can proceed in the crypto space: “If you’re not willing to tell people what a security is, it seems very unproductive to go in after the fact and start picking people off for not having registered.”

She also said she supported approval of bitcoin ETFs on joining the SEC in 2018, with the the process kicked off by Grayscale taking far longer than she would have liked.

Giving those who are waiting for an ether ETF reason to hope, Peirce said it’s “under consideration” at the SEC but depends on facts and circumstances. She also expressed concerns about CBDCs and financial freedoms, saying they should not be a means for government to surveil people and how they choose to spend their money.

BIS makes stablecoin recommendations

The Bank for International Settlements (BIS) has issued a list of 10 recommendations for global stablecoins (GSC).

The aim is to address financial stability risks posed by GSCs, both at the domestic and international level, while supporting responsible innovation and providing sufficient flexibility for jurisdictions to implement domestic approaches.

“Stablecoins, like other cryptoassets, have the potential to enhance the efficiency of how financial services are provided, but they may also generate risks to financial stability,” the BIS said.

The recommendations are:

1. Authorities’ readiness to regulate and supervise global stablecoin arrangements: Authorities should have and utilize the appropriate powers and tools, and adequate resources, to comprehensively regulate, supervise and oversee a GSC arrangement and its associated functions and activities, and enforce relevant laws and regulations effectively.
2. Comprehensive oversight of GSC activities and functions: Authorities should apply comprehensive and effective regulatory, supervisory and oversight requirements consistent with international standards to GSC arrangements on a functional basis and proportionate to their risks insofar as such requirements are consistent with their respective mandates.
3. Cross-border cooperation, coordination and information sharing: Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication, information sharing and consultation in order to support each other in fulfilling their respective mandates and to ensure comprehensive regulation, supervision and oversight of a GSC arrangement across borders and sectors, and to encourage consistency of regulatory and supervisory outcomes.
4. Governance structures and decentralized operations: Authorities should require that GSC arrangements have in place and disclose a comprehensive governance framework with clear and direct lines of responsibility and accountability for all functions and activities within the GSC arrangement.
5. Risk management: Authorities should require that GSC arrangements have effective risk management frameworks in place that comprehensively address all material risks associated with their functions and activities, especially with regard to operational resilience, cyber security safeguards and anti-money-laundering/countering the financing of terrorism(AML/CFT) measures, as well as “fit and proper” requirements, if applicable, and consistent with jurisdictions’ laws and regulations.
6. Data storage and access to data: Authorities should require that GSC arrangements have in place robust frameworks, including systems and processes for the collecting, storing, safeguarding and timely and accurate reporting of data. Authorities should have access to the data as necessary and appropriate to fulfil their regulatory, supervisory and oversight mandates.
7. Recovery and resolution of the GSC: Authorities should require that GSC arrangements have appropriate recovery and resolution plans.
8. Disclosures: Authorities should require that GSC issuers and, where applicable, other participants in the GSC arrangements provide all users and relevant stakeholders with comprehensive and transparent information to understand the functioning of the GSC arrangement, including with respect to the governance framework, any conflicts of interest and their management, redemption rights, stabilization mechanism, operations, risk management framework and financial condition.
9. Redemption rights, stabilization and prudential requirements: Authorities should require that GSC arrangements provide a robust legal claim to all users against the issuer and/or underlying reserve assets and guarantee timely redemption. For GSCs referenced to a single fiat currency, redemption should be at par into fiat. To maintain a stable value at all times and mitigate the risks of runs, authorities should require GSC arrangements to have an effective stabilization mechanism, clear redemption rights and meet prudential requirements.
10. Conformance with regulatory, supervisory and oversight requirements before commencing operations: Authorities should require that GSC arrangements meet all applicable regulatory, supervisory and oversight requirements of a particular jurisdiction before commencing any operations in that jurisdiction and adapt to new regulatory requirements as necessary and as appropriate.