Bloomberg published an article on December 22 titled “All The Ways That Crypto Broke in 2022.” The article closes by asking, “Is there a fix for all the ways crypto broke in 2022? Skeptics and fans alike expect more rules and more regulations, especially in the realm of consumer protection. For some, it will be too little too late.”

The Securities and Exchange Commission issued letters to U.S. public companies on December 8 that they should disclose to investors any damage they have incurred due to recent distress in the cryptocurrency industry. The letter from the SEC Division of Corporation Finance says, “Recent bankruptcies and financial distress among crypto asset market participants have caused widespread disruption in those markets. Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business.”

According to Reuters, the Department of Justice is considering charging Binance and its executives for possible money laundering violations. A spokesperson for Binance refuted the report and said, “As has been reported widely, regulators are doing a sweeping review of every crypto company against many of the same issues. This nascent industry has grown quickly and Binance has shown its commitment to security and compliance through large investments in our team as well as the tools and technology we use to detect and deter illicit activity.”

On December 16 the Financial Stability Oversight Council approved its 2022 annual report. The report includes recommendations related to digital assets. In its announcement of the report, FSOC said, “The Council emphasizes the importance of agencies continuing to enforce existing rules and regulations applicable to the crypto-asset ecosystem. The Council has also identified gaps in the regulation of digital asset activities. To address these gaps, the Council recommends the enactment of legislation providing for rulemaking authority for federal financial regulators over the spot market for crypto-assets that are not securities. Steps should be taken to address regulatory arbitrage, since crypto-asset entities offer services similar to traditional financial institutions but do not have a consistent or comprehensive regulatory framework. An assessment should be made of whether vertically integrated market structures can or should be accommodated under existing laws and regulations. Finally, the Council recommends that Council members continue to build capacities related to data and the analysis, monitoring, supervision, and regulation of digital asset activities.”

The Wall Street Journal reported that the Securities and Exchange Commission is increasing its scrutiny of cryptocurrency company audits. SEC Acting Chief Accountant Paul Munter said that “Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm” and that having such a report “is not enough information for an investor to assess whether the company has sufficient assets to cover its liabilities.”

According to a New York Times article, SEC Chair Gary Gensler is pushing back on calls for new laws to oversee digital assets, arguing that existing SEC rules and Supreme Court decisions are sufficient to regulate the industry. He also said in an interview on December 22 that he would support legislation to regulate certain sectors, like stablecoins, but thinks that some other bills could undermine his agency’s existing authority.

Senate Banking Committee Chair Sherrod Brown (D-OH) introduced a bill on December 6 targeting fintech-backed companies that offer bank services without Federal Reserve supervision. Cosponsors include Sens. Bob Casey (D-PA) and Chris Van Hollen (D-MD). The bill would require state-chartered firms called industrial loan companies to be subjected to the same level of Federal Reserve oversight as other banking institutions.

Sens. Elizabeth Warren (D-MA), Roger Marshall (R-KS), and John Kennedy (R-LA) sent a letter on December 5 criticizing San Diego-based crypto bank Silvergate for its role in potentially transferring funds between FTX and his hedge fund, Alameda Research, as part of FTX’s alleged use of customer funds to plug holes in Alameda’s balance sheet during this year’s crypto market crash. The letter says, “Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients.”

Sens. Elizabeth Warren (D-MA) and Roger Marshall (R-KS) introduced a bill on December 14 to force cryptocurrency businesses and developers to comply with anti-money laundering and anti-terrorist financing rules. Warren said, “The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security.” Specifically, the bill would direct FinCEN to designate wallet providers, miners, validators, and other crypto-related entities as money services businesses, which would require them to comply with the Bank Secrecy Act’s KYC rules.