DWN Op-Ed: Who Regulates the Regulators?

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Regulation is always a hot topic. It’s also no secret that regulators love to regulate (ah, the power). So, more regulators result in more regulations and more power. And, bigger egos for the “head regulator.” The grab for new “fresh” regulatory turf is a prize coveted by any opportunistic “head regulator” to expand their power. So, with regulatory agencies expanding and the heads of those agencies gaining more power, the big question is, who regulates those regulators (and please, don’t say Congress)?

Currently the biggest prize and the freshest turf is the regulation and oversight of cryptocurrencies and digital assets. Certainly the Securities and Exchange Commission (SEC) has recently muscled its way into becoming the “king/queen” of crypto regulation. To soothe egos over at the Commodity Futures Trading Commission (CFTC), Gary Gensler (SEC Chairman) tossed bitcoin and ethereum over to the CFTC to regulate. But, everything else is “OURS”, claimed Mr. Gensler. Toss a few crumbs over there but keep the whole cake for me.

But wait. Are the regulators getting too big for their britches/skirts? Are their egos and power grabs making them immune from accountability? And, making them “lazy?” And why is there no significant push back from those being regulated? Fear? Well, yeah, sure. But come on, where are all the aggressive (“greedy”) lawyers out there to keep things even?

Should regulatory agencies be held financially liable and accountable for their actions? I’m sure that by now you have heard of the Camp Lejuene water contamination lawsuit (and if you haven’t, where the hell have you been). Would regulators be so heavy-handed if they were left open to such liability? Or, would they actually think twice (or more) on how they regulate and enforce regulations. Perhaps keeping regulators “in check” would be in everyone’s best interest.

To be sure, a regulator is a regulator. Any industry. Environment. Health. Consumer. Etc.  I was watching an episode of “American Greed” on CNBC the other evening (not sourcing ideas) covering the Boeing 737 Max jet and the unfortunate crashes that occurred early on. The FAA faulted Boeing’s corporate culture in cutting corners for profit while introducing a new software system which contributed to the accidents. The FAA cited the company AND the Boeing Board for not having a safety oversight committee. WAIT! Isn’t that the FAA’s responsibility? The FAA is responsible for certifying and vouching for the safety of that aircraft. Was the FAA held responsible, both legally and financially? No. Come on, legal beagles.

Now, where I’m going with this is the SEC says they want to regulate crypto/digital assets but are they qualified? Remember Bernie Madoff and his multi-billion dollar Ponzi scheme? The SEC was warned multiple times of potential fraud at Madoff’s firm. The SEC had regulators in-house at Bernie’s firm (not uncommon) to monitor activities. Was the SEC negligent in its oversight? Were they “lazy” in their regulatory function? Should they have been held financially responsible and participated in reimbursing clients for losses? Again, where are the sharp lawyers?

Should regulatory agencies be held financially accountable for their decisions? Again don’t say it is up to Congress (lol). Before turning the SEC into the regulatory authority for crypto/digital assets, perhaps the industry should speak up and ask….”Who Regulates the Regulators?”