Policymakers Didn't Regulate Crypto 'Because They Thought It Would Essentially Die': Barclays Head of Digital Policy

By Liam J. Kelly and Stephen Graves

The latest uptick in regulatory action around the globe may be due to policymakers finally waking up to cryptocurrencies.

On a recent panel at the Citi Digital Money Symposium in London, which touched on crypto regulations in the United Kingdom, Europe, and the United States, Barclays head of digital policy Nicole Sandler argued that the apparent late arrival from policymakers was actually intentional.

"I think one thing certain policymakers have said is that they left this market to do what it wanted to do because they thought it would essentially die," she said. "And it hasn't died, it's grown, it's grown, it's grown."

Drawing from her experience in 2016, when she discussed a legal framework around digital assets with the European Commission, Sandler argued that the space may have been nascent then, but it certainly isn't now—and again repeated that its nascence wasn't why regulators stayed away until recently.

"It wasn't that it was nascent and they couldn't regulate it, it was a choice to see where the market went," she said. "And now they know that they have to regulate it. But the problem is regulation takes a long time from start to finish."

Crypto regulations in the US

The regulatory crackdown has been especially fierce in the United States.

Following the collapse of Sam Bankman-Fried's FTX empire in November, the Securities and Exchange Commission (SEC) has taken swift and decisive action. After charging Bankman-Fried, the SEC also charged the crypto exchange's co-lead engineer Nishad Singh with defrauding investors.

Still, insisted Sandler, the FTX collapse had "nothing to do with the technology."

And though regulations would've certainly helped, the exchange's downfall revolved primarily around a "bad actor," she said, adding that the firm's terms and conditions "didn't say you can take your client funds and use it for something other than what they've said."

The Commission has also gone after other crypto firms for different reasons. On March 22, the SEC issued Coinbase with a Wells Notice, informing the California-based exchange that it would be pursuing enforcement action against the company. The notice alleged that Coinbase's staking products constituted unregistered securities.

A source close to the matter told Decrypt that Coinbase leadership is frustrated that the SEC allowed American investors to participate in crypto for years before "suddenly deciding to pull the rug out."

The crypto community has been up in arms over the matter, taking aim at the SEC chair in particular.

"People don't like Gary Gensler, who's the chair of the SEC, in the crypto space," said fellow panelist Ijeoma Okoli, the director of the Digital Economy Initiative. "But if people think back to about ten years ago, in the aftermath of the financial crisis, when the same man was the chair of the CFTC, the vast majority of the derivatives sector–the global derivatives sector–hated him. So it's not that he's picking on crypto, this is just his M.O."

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