Can crypto regulate itself? The Lummis-Gillibrand bill hopes so.

Creating the equivalent of the stock markets’ FINRA for crypto is the ideal, but experts doubt that it will be easy.


The idea of creating a government-sanctioned private regulatory association has been drawing more attention in the debate over how to rein in a fast-growing industry whose technological quirks have baffled policymakers.

Illustration: Christopher T. Fong/Protocol

Regulating crypto is complicated. That’s why Sens. Cynthia Lummis and Kirsten Gillibrand want to explore the creation of a private sector group to help federal regulators do their job.

The bipartisan bill introduced by Lummis and Gillibrand would require the CFTC and the SEC to work with the crypto industry to look into setting up a self-regulatory organization to “facilitate innovative, efficient and orderly markets for digital assets.”

The idea of creating a government-sanctioned private regulatory association — similar to FINRA, which works with the SEC, and NFA, which works with the CFTC — has been drawing more attention in the debate over how to rein in a fast-growing industry whose technological quirks have baffled policymakers.

A crypto SRO could play an important role in helping the federal government “oversee the burgeoning cryptocurrency industry,” a group of attorneys, including former CFTC Chair J. Christopher Giancarlo, wrote in February 2021.

“Given the infancy of cryptocurrency and the complexity of its underlying technologies, substantial technical input from stakeholders is crucial for the development of sound regulatory policies,” they said.

Proponents of a crypto-focused SRO cite the role FINRA plays in regulating the capital markets. The agency, under the SEC’s supervision, writes and enforces rules and makes sure brokers are complying with them.

FINRA “plays a critical role in ensuring the integrity of America’s financial system — all at no cost to taxpayers,” according to its website. The NFA fulfills similar responsibilities for the CFTC.

Jonah Crane, a partner at Klaros Group, said setting up an SRO for crypto would “represent a major step forward in the professionalization of the digital asset industry.”

An SRO would “form the first line of defense for regulating large, complex markets,” he said. Typically self-funded, the organizations can “be more hands-on” while ensuring “proper accountability to the regulatory agencies and ultimately to the public through Congress,” Crane added.

The crypto industry has taken steps to set up its own SROs. In 2018, a group of crypto companies led by Gemini launched the Virtual Commodity Association to serve as an SRO for the “virtual currency industry.” That same year, companies like Paxos and Galaxy Digital formed the Association for Digital Assets Markets. Neither has actually taken on that role: The VCA describes itself as “working towards establishing itself as an SRO” and ADAM says it is currently an “information exchange” for the industry.

The slow progress is likely because the idea of an SRO for the crypto industry has been controversial.

Some crypto groups oppose the idea, Lummis said. “While they're butting heads, it makes it hard for us to move forward on provisions like that,” she told Protocol. “If that fight were to become very divisive within the industry, it would prevent us from being able to move the bill forward easily.”

The dispute centers on a contentious point: Which federal regulator is going to take the lead in regulating crypto?

Perianne Boring, founder of the Chamber of Digital Commerce, said “self-regulation” will be an important component for “every significant industry.”

“But it doesn’t replace the certainty that regulatory oversight engenders for an industry, particularly one that is quickly evolving,” she told Protocol.

Kristin Smith, executive director of the Blockchain Association, said “there may be a role for an SRO” but that is not a decision that should be made right now. “What we need to do right now is figure out what agency is going to have the overarching jurisdiction,” she said.

The crypto industry clearly prefers the CFTC to take the lead, instead of the SEC, which has been criticized for aggressive enforcement actions.

A crypto SRO might not expect a warm welcome from its peers, even as the wealth management industry increasingly blends crypto and stock trading.

FINRA has taken a critical posture toward crypto. In 2019, following the wave of initial coin offerings, its chief legal officer, Robert Colby, said, “A lot of these ICOs are techno wrappers around penny stocks.”

In 2018, FINRA charged a Massachusetts broker for “unlawful distribution of an unregistered cryptocurrency security” called HempCoin.

FINRA has also been criticized for failing to act on some crypto broker applications “because they don't have the right sort of guidance from the SEC,” Smith said.

FINRA declined to comment.

Smith said that based on “where the Lummis bill stands today, where it really focuses on the CFTC, it may be through that process that there is an SRO that works with the CFTC.”

But the CFTC will likely share center stage with the SEC. Despite the perception that the Lummis-Gillibrand bill would give the CFTC the main oversight role for crypto, Lummis recently clarified that that’s not the case.

While she views the biggest cryptocurrencies by market cap, bitcoin and ether, as commodities and therefore subject to CFTC regulation, most other cryptocurrencies will likely be regulated as securities by the SEC, she said.

“There are thousands of cryptocurrencies that, under the Howey Test, are securities. They just are,” Lummis said.

The Blockchain Association is pushing back on that view, which is bound to be a major point of debate in crypto regulation. “I think this is evolving legislation,” Smith said. “We believe that a vast majority [of tokens] that are traded on exchanges in the United States are commodities.”

Settling that issue is a key hurdle for creating an SRO for the industry. So is the industry’s youth, said Marc Fagel, the SEC’s former regional director for San Francisco and now a lecturer at Stanford Law School.

FINRA dates back to 2007, when the National Association of Securities Dealers merged with NYSE Member Regulation to form a unified stock-markets SRO. NASD itself dates back to 1939, and the NYSE traces its roots back to 1792.

Fagel said he remained “dubious about an SRO in the crypto space at this time,” suggesting the industry is simply too new and undeveloped to regulate itself.

“With FINRA, you have long-standing broker-dealers whose legitimacy and financing are well established,” Fagel told Protocol.

“How many players in the crypto space have the same bona fides such that the regulators are willing to delegate them oversight authority? … The brokerage industry is heavily regulated and populated by seasoned companies, while crypto is still the Wild West.”


How GM plans to make its ambitious EV goals reality

The automaker's chief sustainability officer is optimistic that GM is well-positioned to rapidly scale up the EV side of its business.

"I think everything that’s been put in place to support the transition will be a real positive for the industry and for the country."

Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

Automakers are on the cusp of an entirely new era.

The transition to electric vehicles is quickly becoming more than just theoretical: More models are coming onto the scene every day. This week, the Inflation Reduction Act was signed into law, enshrining a new structure for EV tax credits and offering a boost to domestic critical mineral mining. The transition isn’t coming a moment too soon, given that the transportation sector makes up the largest share of greenhouse gas emissions in the U.S.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (

As management teams at financial institutions look for best practices to make part of their regular toolkit, they are reaching most for the ones that increase the speed and reduce the risk of large-scale change.

That forward-thinking approach can lead financial institutions to leverage AI technology, which can help give decision-makers trusted tools to solve integral challenges vital to the health of the business. One of the leading providers of AI and machine-learning software, DataRobot continues to attract clients in financial services who want to de-risk their AI investments and rapidly scale AI to almost every part of their operations, resulting in improved productivity and higher customer satisfaction.

Keep Reading Show less
David Silverberg
David Silverberg is a Toronto-based freelance journalist, editor and writing coach. He writes for The Washington Post, BBC News, Business Insider, The Toronto Star, New Scientist, Fodor's, and several alumni magazines. He also writes for brands such as 23andme, Shopify and Bold Commerce. He has served as editor of B2B News Network, Canada's only B2B news magazine, and Digital Journal, a leading pioneer in citizen journalism. Find more about him at

How Embracer Group bought ‘Lord of the Rings’ rights for a bargain

The Swedish holding company, known best for its gaming acquisitions, bought the rights to “The Lord of the Rings.” But the deal is much more complicated than it seems.

Who really owns LOTR's rights?

Photo: New Line/WireImage

A new stakeholder has entered the complex licensing web of “The Lord of the Rings,” and the landmark deal has further complicated the already messy media empire surrounding author J.R.R. Tolkien’s fantasy epic.

The buyer, the acquisition-hungry Swedish gaming conglomerate known as Embracer Group, has purchased Middle-earth Enterprises, and with it the associated film, video game, board game, merchandise, theater production and theme park rights to the core LOTR book trilogy and “The Hobbit'' from its previous owner, The Saul Zaentz Company. Formerly Tolkien Enterprises, Zaentz’s holding group has held onto the rights since purchasing them from United Artists in 1976. (Tolkien initially sold them to UA in 1969, four years before his death.)

Keep Reading Show less
Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at


Upstart has a new plan to sell Wall Street on its loans

The AI-powered lender will hold some loans on its balance sheet as it seeks partners for long-term capital.

Despite the current struggles, Upstart views the marketplace model as the best way to write to keep its loan business growing.

Photo: Upstart

After a revenue drop its CEO called “unacceptable,” the leadership at fintech lender Upstart is making a bet on the strength of its ability to underwrite loans with AI.

The San Mateo company is planning to leave some loans on its balance sheet that investors do not want to buy, as concerns about the economy shift Wall Street away from backing riskier consumer debt. Rather than pull back on its lending in response, the company said it will hold some loans as it seeks longer-term capital partners.

Keep Reading Show less
Ryan Deffenbaugh
Ryan Deffenbaugh is a reporter at Protocol focused on fintech. Before joining Protocol, he reported on New York's technology industry for Crain's New York Business. He is based in New York and can be reached at

Does your boss sound a little funny? It might be an audio deepfake

Voice deepfake attacks against enterprises, often aimed at tricking corporate employees into transferring money to the attackers, are on the rise. And at least in some cases, they’re succeeding.

Audio deepfakes are a new spin on the impersonation tactics that have long been used in social engineering and phishing attacks, but most people aren’t trained to disbelieve their ears.

Illustration: Christopher T. Fong/Protocol

As a cyberattack investigator, Nick Giacopuzzi’s work now includes responding to growing attacks against businesses that involve deepfaked voices — and has ultimately left him convinced that in today's world, "we need to question everything."

In particular, Giacopuzzi has investigated multiple incidents where an attacker deployed fabricated audio, created with the help of AI, that purported to be an executive or a manager at a company. You can guess how it went: The fake boss asked an employee to urgently transfer funds. And in some cases, it’s worked, he said.

Keep Reading Show less
Kyle Alspach

Kyle Alspach ( @KyleAlspach) is a senior reporter at Protocol, focused on cybersecurity. He has covered the tech industry since 2010 for outlets including VentureBeat, CRN and the Boston Globe. He lives in Portland, Oregon, and can be reached at

Latest Stories