Kathy Kraninger, a former director of the United States Consumer Financial Protection Bureau or CFPB, stated that while crypto enthusiasts have complained about lack of clarity in regulatory matters, the legal grey area has provided the industry with opportunities.
Kraninger spoke to Cointelegraph and stated that Congressional action would result in the division of the regulatory roles of the various agencies, including the Securities and Exchange Commission (or SEC) and Commodity Futures Trading Commission (or CFTC). She said that it was unlikely that any one department would be able to control all investment products in the space of digital assets.
The former director of CFPB stated that it was not in the SEC’s best interest, its nature or even its current position to say “oh yeah,” and give all the criteria necessary to determine what security would be able to answer everyone’s questions. “That’s not going to happen. I can understand why the industry wants it, but it could also be very detrimental if it did. This could be an overreach. It could go beyond.
SEC, CFTC and CFPB, Financial Crimes Enforcement Network and Federal Trade Commission deal with different aspects of digital asset regulation in the United States. This creates a patchwork approach that companies must use to legally operate. Some U.S. legislators have suggested that certain agencies work together to create regulatory clarity. Others have introduced legislation to give one department more power.
Kraninger believes that case law from enforcement actions could provide regulatory clarity. The SEC declared 9 cryptocurrencies securities in a July insider trading case against Ishan Wahi (his brother) and an associate. In a Friday filing, lawyers representing an ex-OpenSea product manager accused of insider trading claimed that authorities were using this case to establish a precedent that nonfungible tokens are securities.
Kraninger said that the decentralized space of finance could prove to be the next great proving ground for regulators.
“DeFi takes it to a whole new echelon in terms the agencies that could potentially be implicated, use cases, and the lack of intermediaries, If you truly are central […] That whole decentralized ecosystem, and the use case therein — that’s something regulators around the world are really going to struggle to deal with.”
Related: US Senator Hagerty to CFPB director: Don’t stifle Crypto Innovation
Since July 2021, Kraninger has been the vice president of regulatory affairs for market surveillance firm Solidus Labs. She took over from Dawn Stump at the CFPB. Dawn Stump, former CFTC commissioner, announced on Aug. 16 that she would be joining the company to serve as a strategic adviser.