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(Kitco News) – The House Committee on Oversight and Reform jumped headlong into its involvement in the cryptocurrency sector on Tuesday, revealing that it had sent a series of letters to numerous federal agencies and cryptocurrency exchanges as part of its efforts to protect Americans from fraud. .
Four agencies were targeted by the committee; the Treasury Department, Federal Trade Commission, Commodity Futures Trading Commission and Securities and Exchange Commission, as well as five crypto exchanges – Coinbase, FTX, Binance.US, Kraken and KuCoin.
The purpose of the letters was to request information and documentation on the steps taken, if any, to protect consumers from scams and instances of cryptocurrency-related fraud.
In the letters, Rep. Raja Krishnamoorthi, D.-Ill., chair of the subcommittee on economic and consumer policy, noted that “While stories of skyrocketing prices and overnight riches have drawn professional and amateur investors to cryptocurrencies, scammers cashed in.”
“The lack of a central authority to report suspicious transactions in many situations, the irreversibility of transactions, and the limited understanding that many consumers and investors have of the underlying technology make cryptocurrency a method of transaction favorite for scammers,” Krishnamoorthi said.
According to a Federal Trade Commission (FTC) study, more than $1 billion worth of crypto has been lost to fraud since the start of 2021, affecting more than 46,000 people.
The letters asked the federal agencies and crypto exchanges contacted to respond with information about what they are doing to protect consumers by September 12. The responses will be used to help develop legislative solutions, according to the committee.
Specifically, the committee is asking crypto exchanges to produce documents dating back to January 1, 2009, which detail their efforts to combat crypto scams and fraud. They are also looking for information on any attempts to “identify, investigate, and remove or report potentially fraudulent digital assets or accounts.”
Documents highlighting discussions on “whether to adopt stricter policies” were also requested.
Funds on centralized platforms are at risk
The collapse of several centralized platforms in 2022, including Voyager Digital and Celsius, brought to the fore concerns about the security of cryptos held by centralized entities and prompted the committee to take action to help protect consumers. .
The now bankrupt platforms have shed light on the question of who owns cryptocurrency assets when a custodial firm goes bankrupt. As things stand with these two companies, customers are treated as unsecured creditors, rather than federally insured bank depositors, which means there is no guarantee that they will recover. their money.
More than anything, regulators seek to establish clear guidance that they can provide to consumers in their interactions with private sector entities in the future.
“Without clear definitions and guidance, agencies will continue their infighting and be unable to effectively implement consumer and investor protections related to cryptocurrencies and the exchanges they are traded on,” Krishnamoorthi said.
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