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Jessica Mathews here, finance writer over at Fortune. Hackett is (still) on his well-deserved break. Since you asked, he is in New Hampshire, home of the Bretton Woods agreement.

Now that we got that out of the way, let’s talk about deadlines. In particular, the one Senator Elizabeth Warren just set for the Securities Exchange Commission.

Warren, the Massachusetts Senator and chair of the Senate Banking Committee’s Subcommittee on Economic Policy, sent SEC Chairman Gary Gensler a letter yesterday—shortly before the crypto crash that took place this morning. She asked the regulatory agency to provide answers to five questions over its current authority and position on regulation for cryptocurrency exchanges. The SEC has until the end of the month to respond (by July 28, to be exact).

Before I get into Warren’s apprehensions over the current state of regulation for crypto exchanges (hint: she isn’t thrilled about it), it’s important to point out something she alluded to in the letter: How Congress may need to get involved in the matter.

Right now, most of the guidance on cryptocurrency has been issued from the SEC, the Commodities and Futures Trading Commission (CFTC), the Federal Trade Commision (FTC), and a series of other acronyms representing financial regulators. (Here is a useful guide on crypto regulation in 2021)

Regulators have generally been focused on understanding the crypto markets first, so they don’t over-regulate or stifle innovation, according to Tyrone Ross, CEO of Onramp Invest, which is a cryptoasset management tech solution for financial advisors.

“I think they’re close to having some cohesive guidance,” Ross says of the SEC and CFTC.

The legislative powers that be have made some of their own moves as well. At the end of April, the House passed a bill that would clarify cryptocurrency regulation in the U.S., which is still under review in the Senate.

After the SEC provides Warren with the requested information, it’s unclear exactly how or in what way she might urge Congress to get involved. But it still raises a question: Does it need to be?

Key concerns Warren laid out revolve around how cryptocurrency exchanges don’t operate under the same protections that a national securities exchange would. The New York Stock Exchange or Nasdaq are monitored by the CFTC and the SEC. Crypto exchanges, on the other hand, are held to individual state money and payment rules instead, she wrote.

Warren raised unease over there being manipulation of trading data on these exchanges as well as potential proprietary trading (when a company trades against or takes advantage of customers’ trades) and wash trading (when a company trades with itself to make it seem like there’s more liquidity or to manipulate price). She cited a 2018 New York State Office of the Attorney General investigation that found Coinbase was responsible for nearly 20% of the trading volume on its platform—a liquidity risk customers may not have been aware of. She also mentioned how fraud has been problematic: Between October 2020 and March 2021, nearly 7,000 people lost a cumulative $80 million from crypto scams, the letter reads.

“The SEC regulates national securities exchanges, and cryptocurrency exchanges that operate in a similar manner should be subject to similar regulatory standards,” Warren argued in the letter.

Ross of Onramp acknowledged that investor protections aren’t coming quickly enough—there’s no kind of FDIC insurance for digital asset investors and there are some valid concerns around market manipulation, he says. He hopes this letter will lead to constructive conversations about that.

But he worries Congress has little understanding of cryptocurrency and the blockchain technology that powers it, and says it could benefit many to get comfortable, grab a cup of coffee and learn how all this works. If legislators get involved prior?

“I think it could stifle innovation and slow the space down tremendously,” he says, emphasizing that digital assets are still new—only 12 years old.

If you’re interested in reading Warren’s letter in its entirety, here it is.

Thanks for having me this week!

Jessica Mathews
@jessicakmathews
jessica.mathews@fortune.com (one ‘t’!)

DECENTRALIZED NEWS

Credits 🚀

An Alabama Congressman is scooping up dogecoin, ether, and cardano … Crypto payment company Circle said it would go public … IBM said is using blockchain technology to clean up the food supply chain ... Visa is partnering with more than 50 crypto companies so clients can convert or spend digital assets with their cards ... Baby Doge is making its NASCAR debut on a Chevrolet Camaro this weekend … Turkey’s population is getting (a lot) more into crypto than last year … Filmmaker Spike Lee directed and starred in a commercial for digital asset machine company CoinCloud … A YouTuber is getting paid in dogecoin … The Fed Chairman met with the Coinbase CEO in May, though we don’t know why … A Swiss bank started letting its clients stake their ether holdings with the bank to earn a yield … Sotheby’s will let you buy this diamond with Bitcoin.

Debits 🐻

Prices for Bitcoin, Ether, Dogecoin and most alt-coins are all down … Ric Edelman said Dogecoin was “nothing more than a joke” … Apparently, about two in 10 British crypto investors know little about crypto … DeFi innovators are taking steps to move the stock market to blockchain … Crypto exchange Binance is facing scrutiny in Thailand and the Cayman Islands … Now that we’re talking about Binance, Barclays will no longer allow its clients in the UK to transfer funds there … Santander took similar action ... And if you want to know what its CEO thinks, Changpeng “CZ” Zhao says Binance hasn’t “always got everything exactly right” … An investigation in South Korea found $1.48 billion in illegal overseas crypto transactions.

FOMO NO MO

Listen to The Money Chant of the Wolves of Crypto.

You remember The Money Chant: Matthew McConaughey thumping his chest, talking fools and money before — sniff! — a little lunchtime “tootski.”

Titan Maxamus has been there. Well, not there, in a “Wolf of Wall Street”-style boiler room. There on the other side — as the mark. Titan Maxamus knows the game. All the brazenly cynical players do. In Scorsese’s cinematic bender of sex, drugs and stocks, it’s called the pump and dump. In today’s cryptocurrencies, it’s known as the rug pull.

Maxamus thinks he got rug-pulled the other month in some sketchy digital token called — wait for it — Safe Heaven. Like countless dreamers in today’s memeified markets, he’s been gambling $50 here, $100 there on what are known as Shit Coins, obscure digital something-or-others being minted by the thousands. This stuff makes Bitcoin look good as gold.

One moment, Safe Heaven was flying. The next, it was crashing. Maxamus (that's his online persona. His real name is Glenn Titus), can’t prove anything. But he suspects what, in retrospect, seems forehead-slappingly obvious: some small-time hustler created Safe Heaven with a few deft keystrokes, hyped the hell out of it — and promptly cashed out. Telegram, a popular instant messaging app that’s become a major crypto boiler room, immediately fell silent. The Safe Heaven Telegram group, once thronging with rocket emojis and Elon Musk GIFs, was deleted. The Safe Heaven Twitter account hasn’t been updated since May 28.

“Everybody I know has gotten rug-pulled,” says Titus, a 38-year-old butcher in Salem, Oregon. “You know, you win some, you lose some. Hopefully, win more than lose.”

It might sound like a joke, given the crypto meltdowns of late, but serious money is at stake here. Billions — real billions — are getting pilfered annually through a variety of cryptocurrency scams. The way things are going, this will only get worse.

That’s from a Bloomberg feature story published earlier today on how pump-and-dump schemes are going digital. Based on the prevalence of scams in the crypto market, many digital currency investors even expect to lose some of their investments.

While there has actually been a decline in the amount of money stolen in crypto scams since 2019, there’s more people being defrauded. The number of victims went up by nearly 50% to an estimated 7.3 million between 2019 and 2020, according to the report—and the authors remind us that this figure approaches the Hong Kong population.

BUBBLE-O-METER

30

That’s the number of Telegram groups that fraud-prevention company Sift tracked over the last year—including “Fraud University" and “BitcoinBandits”—where scammers discussed or sold methods for bypassing identity verification processes on cryptocurrency exchanges.