US Govt. Firm on Resolving Cryptocurrency IssuesFeb 07, 2018 at 13:09
The Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commision (SEC) met Monday morning to discuss their roles in regulating Blockchain, virtual currencies, and initial coin offerings (ICOs).
In a testimony released before the meeting was held, CFTC chairman, J. Christopher Giancarlo expressed optimism towards Blockchain/Distributed Ledger Technology (DLT), citing numerous ways financial institutions, charities, social services, agriculture, and logistics can all benefit from it.
“This simple approach is well-recognized as the enlightened regulatory underpinning of the Internet that brought about such profound changes to human society. During the almost 20 years of do no harm regulation, a massive amount of investment was made in the Internet’s infrastructure. It yielded a rapid expansion in access that supported swift deployment and mass adoption of Internet-based technologies,” he expressed.
“Internet-based innovations have revolutionized nearly every aspect of American life, from telecommunications to commerce, transportation and research and developmet. [Do] no harm was unquestionably the right approach to development of the Internet. Similarly, I believe that do no harm is the right overarching approach for distributed ledger technology,” Giancarlo further expressed in the testimony.
Despite the optimism, the chairman noted that digital currencies will likely require “more attentive regulatory oversight” in the aspect of fraud and manipulation but emphasized that room for growth should be provided.
“As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response,” he further explained.
Meanwhile, SEC chairman, Jay Clayton’s signals in the acceptance of virtual currencies has been mixed.
“To be clear, I am very optimistic that developments in financial technology will help facilitate capital formation, providing promising investment opportunities for institutional and Main Street investors alike. From a financial regulatory perspective, these developments may enable us to better monitor transactions, holdings and obligations (including credit exposures) and other activities and characteristics of our markets, thereby facilitating our regulatory mission, including, importantly, investor protection,” he stated.
However, he expressed the strong need to protect investors of cryptocurrencies especially with the public’s strong enthusiasm on it at the moment.
“…Those who invest their hard-earned money in opportunities that fall within the scope of the federal securities laws deserve the full protections afforded under those laws. This ever-present need comes into focus when enthusiasm for obtaining a profitable piece of a new technology before it’s too late is strong and broad. Fraudsters and other bad actors prey on this enthusiasm,” Clayton emphasized.
He lauded Facebook’s recent move to ban ICO advertising, citing a recent study which found that 10 percent of all ICO proceeds have been lost to hacks and fraud. Likewise, the official also praised the innovations of DLT but hopeful to create some boundaries for ICOs.
“Simply said, we should embrace the pursuit of technological advancement, as well as new and innovative techniques for capital raising, but not at the expense of the principles undermining our well-founded and proven approach to protecting investors and markets,” Clayton added.
The two officials agreed that DLT needs the least regulation as they encourage anyone willing to expand on it. However, they are also united in requiring the most regulation in ICOs and virtual currencies for protection against fraud and market manipulation.
During the hearing, their stand were also united that there is a need for additional authorities to regulate cryptocurrencies and ICOs but highlighted the need for both the CFTC and SEC to learn more about the crypto space.
Giancarlo was also questioned by Senator Tom Cotton about the value of Bitcoin, to which he replied that its floor could not be zero as its value is “tied to mining.”
The CFTC and SEC officers also admitted that they have no jurisdiction over nation states, such as Venezuela, using cryptocurrencies to avoid sanctions.
On the other hand, they were also asked by Senator Elizabeth Warren on their proposals to make ICOs safer.
Giancarlo and Clayton answered that among the best ways to solve it is by educating the masses about Bitcoin and cryptocurrencies; jurisdiction over the futures markets of Bitcoin to collect data and keep track of the markets; use taskforce to go after fraudsters who are scam Main Street investors in ICO pyramid schemes and worthless cryptocurrencies.
The officials also concluded that cryptocurrencies will allow growth for the United States the same way that the internet did and that the nation should be a leader in the industry to assure that no investor will get hurt in the process.