US House panel calls for cryptocurrency fraud oversight

A House oversight subcommittee asked regulators and industry leaders on Tuesday to explain what they are doing to stop cryptocurrency fraud and other scams perpetrated on consumers.

Illinois Rep. Raja Krishnamoorthi, head of the Economic and Consumer Policy subcommittee, asked leaders of the Treasury Department, Securities and Exchange Commission, Commodity Futures Trading Commission, and Federal Trade Commission for more information on the steps they are taking to curb the growth of fraud and consumer abuse linked to cryptocurrencies.

The inquiries come as the cryptocurrency market has seen immense volatility, as bitcoin lost nearly half its value at one point this year and other cryptocurrencies fell even more.

“Despite these vulnerabilities, the federal government has been slow to curb cryptocurrency scams and fraud. Existing federal regulations do not comprehensively or clearly cover cryptocurrencies under all circumstances," reads one letter addressed to Treasury Secretary Janet Yellen.

Five of the biggest cryptocurrency exchanges were also sent inquiry letters, requesting documents on company policies regarding the removal of fake accounts.

A report on the impacts of cryptocurrencies and other digital assets on financial markets and illicit finance is expected to be released in the coming weeks. In March, President Joe Biden issued an executive order calling for several agencies to look at ways to regulate digital assets and gave them 180 days to do so.

On Monday, the Federal Bureau of Investigation warned that criminals are more frequently exploiting vulnerabilities on certain decentralized finance platforms to steal cryptocurrency.

Several major legislative proposals were offered in Congress this year as well.

Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark. have proposed a bill that would give the regulatory authority over Bitcoin and Ether to the Commodities Futures Trading Commission. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over CTFC.

In June, Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., proposed the Responsible Financial Innovation Act, which would create legal definitions of digital assets and virtual currencies; would require the IRS to adopt guidance on merchant acceptance of digital assets and charitable contributions; and would make a distinction between digital assets that are commodities and those that are securities.