Crypto regulation: 2022 will be a ‘substantive year for digital asset policy,’ ADAM CEO says

Association for Digital Assets Markets CEO Michelle Bond joins Yahoo Finance Live to talk about crypto regulation and the legislative environment for digital assets in 2022.

Video Transcript

- Welcome back to Yahoo Finance Live. Well, crypto regulation expected to be in the crosshairs yet again in the New Year, with the industry bracing for potential crackdowns after the SEC rejected two applications for the Bitcoin spot ETF, with concerns about investor protection. And then also, crypto executives testifying before lawmakers earlier this month. To talk about all of this, we've got Michele Bond, Association for Digital Assets Markets CEO.

Michele, it feels like we did a lot of talking this year about regulation, but didn't actually come down. And potentially, 2022 will be the year where things shake down. What's at the top of your radar?

MICHELLE BOND: Yes, absolutely, thanks for having me. So I think 2021 was a very formative year. We saw a lot of change happening, certainly, we saw some very prominent policy makers coming into Washington. The Biden Administration has really started to get its footing on crypto assets.

So now, I think that, kind of, set the stage for crypto regulation in 2022. And I think, look, it's going to be a highly substantive year for digital asset policy. I think we're going to see broad principles for crypto regulation really taking shape. And it'll be on the regulatory side and also on the legislative side.

The SEC and the CFTC, I don't think will make significant policy announcements without action from Congress. We are expecting those enforcement cases from the SEC. Chair Gensler has been hinting at them for a while. And these things do take time.

I think the biggest question is, what kinds of cases are we going to see, which topics, how big will they be? I think crypto is noticeably off of the regulatory agenda that the SEC released last week. So I think more to come from the SEC.

The CFTC has been pretty quiet, due to a lack of confirmed commissioners at the agency. The Biden Administration has now nominated individuals for all seats. It's too early to tell what direction the regulator is going to take. But Chairman Benham has made it clear that he's willing to take on a lot more responsibility over digital assets.

And obviously, there are so many other departments and regulators that are stakeholders in this. I mean, how is Treasury going to perceive crypto? Treasury has been hyper focused on it from a threat finance perspective.

And I think we're also going to see some interesting work that Treasury takes on. We've seen some interesting speeches from Deputy Secretary Wally Adeyemo, and Yellen, and Undersecretary Lange. Both hail from traditional economics backgrounds, so they have work experience from being at the Fed. And I think that that positions them as being, obviously, very close with the banking regulators. And we know the banking regulators are all looking at these issues.

FSOC is also talking about this. So are they going to deem Stablecoins as systemically important? I think the MetLife case raised a lot of questions about the extent to which the FSOC has authority. So I think every single regulator, or financial regulator, in Washington is going to be looking at crypto in 2022.

- Yeah, Michelle, you laid out a very long list of headwinds for this space, right now, going into next year. Let's talk about the legislative side of things. We did see that first real high profile testimony with crypto executives, testifying before Congress. We also had a separate one that was focused strictly on Stablecoins. Which one do you-- which side do you see lawmakers really moving on in the early part of the year?

MICHELLE BOND: I think that hearing in the House Financial Services Committee, with all the crypto CEOs, went an incredibly long way for crypto policy. And that really sets the stage in going into 2022. The lawmakers were so receptive, like, on a bipartisan basis, to what the crypto CEOs had to say. And they really seemed to want to develop, I would say, a responsible public policy framework. So I think this is really just the beginning.

And what I saw from that hearing, I was there, they want to see the industry flourish. They want to see how the US can benefit. But at the same time, they want to make sure that consumers are protected and there are appropriate guardrails in place for market integrity and investor protection. I think there are going to be a lot more hearings.

And obviously, lawmakers in Washington are seeing all the tweets and everything that's happening with Jack Dorsey and Elon Musk. And it's at top of mind for the general public too. So I think there's going to be a lot happening. And there are some specific-- I think there's going to be a very specific bill that's going to roll out in January that I think is going to be a really big deal.

- What, specifically, are we talking about?

MICHELLE BOND: So Senator Lummis will be rolling out a bipartisan, legacy type digital asset legislation. So it's a big bill. And it's going to comprehensively address digital assets. They'll be covering definitions, tax, securities, commodities, the distinction between the two, Stablecoins, having an SRO, the banking systems interaction with crypto, consumer protection, market integrity. Obviously, the SRO is a big one and I think it's going to be a really big part of this bill.

And I think we're going to see the CFTC have more jurisdiction over spot digital asset transactions. I think the SEC's role in overseeing crypto will be strengthened. And I think the creation of an SRO is also going to be a really, I think, a really big deal. Because we see that with FINRA and NFA, on the securities and on the future side, and I think there's a real role for a digital asset markets SRO to play as well.

- With that said, Michelle, you recently had an op ed where you said that the crypto market should be able to regulate itself. It sounds like you feel-- you think the SEC will try to shape the regulation, but not come in as strong? Do you think they can strike that right balance? And I mean that specifically, and not just the price action we're talking about, but this ability for the space to continue to grow in the way we have seen it in 2021.

MICHELLE BOND: Yeah, and that's a great question. So I actually used to be a lawyer at the SEC and we worked very, very closely with FINRA. And I think it's really important, because I think an SRO can serve as, sort of, that connective tissue between the SEC and the industry.

And it helps from a variety of perspectives. An SRO is more cost effective, it can help advance policy, an SRO can provide regulatory clarity, provide a bigger budget. There are a lot of different things that an SRO can do that would be helpful to the SEC.

And it would actually-- the SRO would act pursuant to delegated authority by both the SEC and the CFTC. So it would be overseen by both regulators. So the idea is that it works in conjunction with the federal regulators. And you know, I think that's important that, you know, the regulators are working together.

- Well, Michelle, we'd love to have you back on in the new year as we continue to have these conversations. Michelle Bond, Association for Digital Assets Markets CEO.