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June 7, 2022

Bipartisan Crypto Bill Is Congress Playing with Fire and Repeating the Mistakes of the Past: Another Financial Crash and More Industry Bailouts

WASHINGTON, D.C.— Better Markets President and CEO Dennis M. Kelleher issued the following statement on the release of a bipartisan crypto bill:

“The bipartisan crypto bill with the Orwellian name of ‘Responsible Financial Innovation Act’ released today will likely result in crypto being largely unregulated, even though it is an extremely volatile financial product with a limited track record, which itself is mostly bad.  Worse, it appears to be designed to disarm the public by making them think crypto will be properly regulated while the industry and the insiders know that is simply not true.  The tell is that the bill gives the industry what it wants most: the Commodities Futures Trading Commission (CFTC) as its primary regulator, even though it exists to police markets where physical producers and purchases of commodities like corn, wheat, oil, natural gas, hogs, and cattle hedge their price risk to facilitate the delivery of everyday goods to the American people.

“Of course, crypto is nothing like corn or hogs or oil, but the industry wants the CFTC as its regulator because it is the smallest financial regulator with the smallest budget.  The financial industry and its allies in Congress have made sure that the CFTC has been chronically underfunded for decades.  While the professionals at the CFTC do an outstanding job with what little they are given to work with, they cannot fulfill their current responsibilities. It will be beyond hopeless if they are also given responsibility for a vast, growing, and technically complex industry like crypto on top of all that.  This is little more than the crypto industry regulator-shopping in Congress, trying to get the most favorable regulator who will be the least capable of regulating.

“Giving the CFTC jurisdiction over crypto is like New York City outsourcing crime fighting to a small-town police force.  You might see a cop every now and then and they might even make the occasional arrest, but by and large the criminals will be running the place.

“By doing this, Congress is playing with fire, and it should know better because that’s exactly what they did in the 1990s by first repealing the Glass-Steagall Act and then prohibiting the regulation of derivatives with the 2000 Commodities Futures Modernization Act (CFMA), including credit default swaps (CDS).  Those Congressional actions, which were also broadly bipartisan, resulted in gigantic banks that were too-big-to-fail and trillions in dangerous derivatives that were unregulated.  In 2008, that caused the biggest taxpayer-funded bailouts in history, the worst financial crash since 1929, and the worst economy since the Great Depression, devastating tens of millions of Americans who lost jobs, homes, savings and so much more.

“Now, just 14 years after that horrific crash, Congress is again listening to the financial industry’s Siren song of innovation, which was also the tune they played for repealing Glass-Steagall, enacting the CFMA, and unleashing CDS on the global financial system.  In a world that wasn’t run by lobbyists, awash in campaign cash, greased by the revolving door, and dominated by secret, backroom deals, this bill would never be filed.  Congress would first hold a series of substantive, public hearings to carefully scrutinize and evaluate crypto’s claims and independently determine how best to actually regulate crypto, rather than first filing bills that largely track the industry’s wish list.  Additionally, Congress would also undertake an intense review of the impact of adding crypto to commodities markets and CFTC regulation of those markets given how vital those markets are to the American people.  If Congress is not to repeat the mistakes of the past, that is what it must do now.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

Contact:  Contact: Anton Becker, Communications Director, at 202-618-6430 or abecker@Bettemarkets.org

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