Despite Lack of Clarity, Binance May Mean Worst Is Over for Crypto

The commissioner of the United States Commodity Futures Trading Commission (CFTC), Kristin Johnson, has suggested in a speech on Tuesday that the regulator’s recent case against Binance may represent a high watermark for enforcement actions against crypto companies.

As reported by Reuters, Johnson said recent high profile enforcement actions had provided a “template” for how crypto firms should be governed and should provide some measure of regulatory clarity moving forward. Her speech was delivered at the Financial Times Crypto and Digital Assets Summit: Winter Edition held in London this week.

Johnson: Regulation Through Enforcement Approach Establishes “guard rails” 

According to Johnson, the regulation through enforcement approach—widely criticised by the crypto community as being slow, punitive and discouraging innovation—has established regulatory “guard rails” and created “order and structure” in the crypto industry. 

She believes this should allow future crypto firms to avoid the regulatory issues Binance and others have experienced:

Johnson also encouraged crypto companies to study rulings closely to get a clear sense of the kind of governance regulators want to see in the crypto industry:

For those firms that really do want to successfully operate in this space, there is an increasingly clear template for how to operate. Take the hint.

Kristin Johnson, CFTC Commissioner

US Still Lacks Regulatory Clarity Compared To Other Jurisdictions

Not everyone agrees the enforcement approach to crypto regulation is working well. Brad Garlinghouse, the CEO of Ripple, has been an outspoken critic of the approach. 

He said last month that US regulators have lost their way and have, in some cases, actually started harming the very investors they’re meant to protect:

I think the SEC, in my opinion, has lost sight of their mission to protect investors. And the question is, who are they protecting in this journey?

Brad Garlinghouse, Ripple CEO

Not all jurisdictions have taken the same enforcement approach to crypto regulation, some like Hong Kong, Dubai and the European Union have sought to create more nuanced and crypto-friendly regulatory environments with the aim of becoming regional crypto hubs.

Brian Quintenz, former commission of the CFTC and current global head of policy at venture capital firm a16z, also speaking at the Financial Times crypto summit, said burgeoning crypto hubs are attracting crypto innovators because they offer more certainty. 

Quintenz said he doesn’t expect the US to provide this kind of certainty in the short-term, lamenting, “I don’t see clarity in the U.S., perhaps the most optimistic case is three years.”