- The Voyager Digital bankruptcy judge has criticized U.S. regulators’ lack of rules for crypto entities
- Judge Michael Wiles asked why regulations are not yet in place given that crypto exchanges have been around for over a decade
- He addressed the issues inherent with the likes of the SEC and CFTC not knowing who should govern what
The U.S. judge overseeing the bankruptcy of Voyager Digital and its potential sale to Binance has criticized the lack of efforts by regulators to put rules in place for crypto entities to follow. In a filing regarding a reorganization and distribution plan for Voyager, Judge Michael Wiles took the opportunity to have a pop at regulators for allowing crypto exchanges to operate with no guidelines and then punishing them for transgressing after the fact. This has been a growing theme over the past two years, although the criticism has come from a very unexpected source.
Regulators “Cannot Seem to Agree” on How to Manage Crypto
Wiles perfaced his comments by saying that “I cannot think of another case I have had that comes before me in a setting quite like this one does”, saying that the antipathy towards cryptocurrencies in general offers an “unusual backdrop to this bankruptcy case”. His opening remarks regarding regulations are striking:
There are firms that operate as cryptocurrency brokers or exchanges, and have done so for several years, without being subject to clear and well-defined regulatory requirements. Regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities that may be subject to regulation by the CFTC, or whether they are securities that are subject to securities laws, or neither, or even on what criteria should be applied in making the decision.
This summary encapsulates the frustration facing cryptocurrency organizations, many of which want to work within the law but simply don’t know how to do so, with Judge WIles noting that this uncertainty has persisted “despite the fact that cryptocurrency exchanges have been around for a number of years.”
Future Doesn’t Look Much Better
Wiles went on to say that the future doesn’t exactly look bright regarding crypto regulation:
If the current regulatory environment can be characterized as uncertain, the future regulatory environment can only be characterized, in my mind, as virtually unknowable. There have been differing proposals in Congress to adopt different types of regulatory regimes for cryptocurrency trading. Meanwhile, the SEC has filed some actions against particular firms with regard to particular cryptocurrencies, and those actions suggest that a wider regulatory assault may be forthcoming. The CFTC seems to have taken some positions that are at odds with the SEC’s views. Just how this will all sort itself out, how the pending actions relating to cryptocurrencies will be decided, and just what issues might be raised in future regulatory actions, and how they will affect individual firms or the industry as a whole, is unknown.
There are many crypto company operators who will be thankful that Judge Wiles has brought this issue to the surface, with Coinbase’s Chief Legal Officer Paul Grewal among them:
Everyone committed to the rule of law should read J. Wiles’ Voyager decision. These are remarkable statements from a federal court with no skin in the game other than calling things as they are.🧵⬇️ /www.nysb.uscourts.gov/sites/default/files/opinions/312840_1170_opinion.pdf
— paulgrewal.eth (@iampaulgrewal) March 15, 2023
Sadly, as Judge Wiles says, the situation doesn’t look like it will be resolved anytime soon, especially with governments now hitting back at crypto in every way then can, rather than trying to help it thrive.