Brookings has published a report by former CFTC Chairman Timothy Massad on cryptocurrency regulation.

In it, Massad calls for new regulatory authority from Congress for the SEC or CFTC to supervise cryptocurrency markets:

Congress should pass legislation providing the SEC (or alternatively the CFTC) with the authority to regulate the offering, distribution and trading of crypto-assets, including regulation of trading platforms, custodians (or wallets), brokers and advisors.

As we wrote last year, we would potentially support the creation of a new, unified federal regulator for trusted parties in the cryptocurrency ecosystem (exchanges, custodians, etc.) but it must come alongside full federal preemption of existing, vague, and innovation-chilling state money transmission licensing laws as they are applied to cryptocurrency activities. This is something the Massad report doesn’t mention, but that policymakers should consider. Trading fifty-three ill-suited and uncoordinated state regulators for a single specialist regulator is a good deal. It would encourage the growth of these technologies here in the U.S. rather than in other countries with already simpler regulatory regimes. Adding one more federal regulator on top of the existing state law soup is a recipe for pushing innovators overseas.

We also subtly disagree with Massad over which agency should be on point. The SEC should continue to police securities markets, including any issuance or trading of crypto-assets that fit the existing definition of a “security.” No new authority is needed from Congress on that subject. Decentralized cryptocurrencies, however, don’t fit the definition of a security and, owing to their public nature, they do not generate information asymmetries that a securities regulatory regime (focused on issuer disclosure) can efficiently correct. Instead, these assets are more like widely traded commodities, so it makes much more sense to have the CFTC on point, even if that means extending their supervisory authority from commodities derivative markets to commodities spot markets in the limited and special case of cryptocurrencies. Massad is right, though, only Congress through new law could create that authority, and we would support that law if it was reasonably calibrated, directed at the CFTC, and preempted state money transmission licensing.

As we wrote almost exactly a year ago,