Central Bank Think Tank Warns Against Repressive Crypto Regulation
President of US-based think tank stresses importance of investor protection, but also need to allow evolving technologies to thrive
Source: Shutterstock / f11photo, modified by Blockworks
Crypto regulation should be executed in a manner that does not choke the industry and suppress revolutionary ideas, according to an independent think tank for central banking and economic policy.
Patricia Haas Cleveland, US president of the Official Monetary and Financial Institutions Forum (OMFIF), wrote in a blog published Monday that the fallout from FTX’s implosion has laid the foundation for greater regulatory clarity, but warned this push should be approached carefully.
“The real story in the wake of FTX is less about cryptocurrencies than advances in the underlying blockchain and other technologies,” Haas wrote. “These are quietly creating transformational tools and applications that will help propel Web3 and reshape the financial industry.”
Haas Cleveland, a New York-based banker, has held senior roles in various financial institutions including the US Treasury, the European Bank for Reconstruction and Development and Citigroup. She’s also worked as a financial advisor to the Asian Infrastructure Investment Bank and advised early-stage tech startups.
She noted the SEC’s record enforcement actions against crypto participants in 2022, a report on stablecoins from the President’s working group and a congressional subcommittee on digital assets as indicators of a clampdown on the industry.
Her note included a cautionary message to regulators, warning that tech advances are playing out in both the decentralized finance (DeFi) and traditional financial realms where distributed ledger technology is being utilized to make processes and payments more efficient.
HSBC and Goldman Sachs’ use of blockchain to enable settlements and custody of digital assets were mentioned as examples of good use cases.
Concerns about regulation stifling the crypto industry were among the topics discussed at the OMFIF roundtable in Washington held on Jan. 23. Timothy Massad, chairman of the Commodities Futures Trading Commission under President Barack Obama, and Lee Brenner, head of public policy for digital assets at Goldman Sachs, were among the speakers present at the discussion.
Haas Cleveland noted that the restraints of scalability and accessibility will be addressed and new possibilities will emerge, allowing open-source blockchains to gain from improved data privacy, speed and lower costs.
“Ensuring the guardrails for investor protection and financial stability are in place is important, but it is equally important to allow development and evolving technologies to thrive. Without that, we miss out on improvements to financial products, services and inclusion, as well as opportunities for risk mitigation,” she said.
“Greater regulatory action may be called for, but regulators must not stifle innovation.”
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