phasized that enforcement actions alone are not enough to protect investors and traders in the crypto space. They suggested that the SEC and CFTC should deploy a joint effort to design a regulatory framework that focuses on the “trading platforms, custodians, market makers, and other intermediaries” in the industry.

• Former SEC and CFTC Heads Jay Clayton and Timothy Massad wrote an opinion piece about domestic crypto policy in the Wall Street Journal this week.
• They suggested that the two agencies should work together to develop basic investor and market protection standards for trading platforms.
• These measures would help eliminate wash trading which has been estimated to represent a substantial portion of trading volume, particularly offshore.

Former SEC and CFTC Chairmen Suggest Joint Crypto Regulation

Jay Clayton, the former chair of the Securities and Exchange Commission (SEC), and Timothy Massad, the former chair of the Commodity Futures Trading Commission (CFTC), recently co-wrote an opinion piece about domestic crypto policy in the Wall Street Journal. The two ex-chairs proposed that both agencies should work closely to create investor and market protection standards for current trading platforms.

Enforcement Actions Alone Not Enough

Clayton and Massad emphasized that their former agencies’ recent enforcement actions against top crypto firms are not likely to increase investor protections any time soon. Instead, they suggested more proactive approaches such as developing basic investor protection standards through direct action or through a self-regulatory organization, with potential funding from industry participants.

Eliminating Wash Trading Necessary

The two ex-chairs noted that centralized exchanges represent more than 90% of spot trading volume, making it essential to address issues such as “wash trading” – where someone trades with themselves or an affiliate to inflate prices or volumes – which has been estimated to account for a significant proportion of offshore trades. Thus they argued that eliminating “wash trading” would be a huge improvement for protecting investors in this sector.

Congressional Mandate Preferred

Clayton and Massad stated that having Congress mandate their joint approach would be even better than implementing it directly or via a self-regulatory organization. This could further improve investor protection by ensuring greater accountability from all involved players in the industry.

Conclusion

While recent enforcement actions have helped bring attention to some issues within crypto markets, there is still much room for improvement when it comes to protecting investors in these markets. Clayton and Massad’s Joint Regulatory Proposal could go a long way towards achieving this goal if implemented correctly by either direct action or through Congressional mandate.