Patrick Daugherty Addresses Regulatory Challenges Before U.S. Crypto Industry

Foley & Lardner LLP partner Patrick Daugherty shared insight on regulatory challenges the U.S. crypto industry faces in the Thomson Reuters article, “U.S. crypto industry fears regulatory fragmentation as Congress delays market structure bill.”

With congressional delays in passing market structure legislation, some states have moved forward with establishing their own digital asset regulations.

“In the market structure legislation, Congress should preempt the states to avoid difficulties here,” Daugherty explained, describing the inherent difficulty for businesses in tracking and ensuring compliance across a patchwork of varying state rules.

“It makes no sense to undertake regulation of the industry if you can’t hire the staff you need to carry out regulatory duties,” Daugherty said of federal and state resource constraints impacting regulators’ ability to keep pace with the industry’s transformation. “The staff needed in New Jersey or New York is much bigger than the staff needed in Arkansas or North Dakota. It would be much more efficient, all the way around, for Congress to preempt the states.”

At the state level, Daugherty also flagged the additional challenge of aligning crypto rules with existing money transmission and securities law, sharing that he has seen some crypto firms overlook licensing issues in this space.

“That’s an ongoing compliance issue. I see that intensifying…not only in the blue states, but in the red states, too.”