SEC and CFTC gave a presentation to a congress committee where they called for a need to have coordinated efforts in coming with viable regulation. Both alluded to the need for a regulation to curb misuse of the innovation.
Regulators in the U.S. have repeatedly alluded to the need for appropriate regulation on ICOs, cryptocurrencies and blockchain tech. However, it is clear that they are willing to allow space for the development of this technology.
For instance, the Senate Committee on Banking, Housing, and Urban Affairs on February 6 heard about the state of cryptocurrencies about regulation by both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
In that submission, it became clear how each committee treats ICOs, cryptocurrencies, and blockchain. CFTC Chairman Giancarlo, for instance, alluded to the need for regulation, but called for the need to first “learn everything”. He also said it was needful to educate consumers regarding cryptocurrency noting that there is “no one agency has direct authority over virtual currencies”. According to him, it is necessary to balance between exercising legal authority over virtual currency derivatives.
The chairman gave a comparison of the total value of all virtual cryptocurrencies ($313 billion) with the global money supply value ($7.6 trillion) and gold value ($8 trillion).
SEC and CFTC said they do not have complete jurisdiction but only sufficient authority over cryptocurrency. For that reason, Senator Mike Crapo, the head of the Senate Committee asked whether the Congress should address the issue by law.
SEC chairman Jay Clayton replied by saying that there is a need for all federal banking regulators. Thus to coordinate plans for dealing with a virtual currency trading market. Although SEC would need an additional legislative authority on the matter. Giancarlo agreed on the need for coordinated efforts but added that the Committee should also look at regulatory gaps.
Clayton said there are three categories in the space, namely blockchain, ICOs, and cryptocurrencies. He told blockchain is impressive in the alleviating of market inefficiencies in regulation. However, he sees cryptocurrencies and ICOs as “subsets of the products seeking to take advantage of the commercial opportunities presented by blockchain”.
He said cryptocurrencies are promoted as dollar replacements and ICOs like stock offerings.
“From what I have seen, initial coin offerings are securities offerings. They are interesting companies, much like stocks and bonds, under a new label. “You can call it a coin, but if it functions as a security, it is a security.”
Clayton submitted that an ICO does not have anything to do with distributed ledger technology beyond the coin itself.
He said that companies engaging in elaborate structuring exercises and semantic gymnastics. It is to avoid a coin being listed as security were “within the crosshairs” of the enforcement division.
CFTC chairman Giancarlo was of a different opinion and stance regarding cryptocurrencies. He gave a story about how his own children’s interest in investing bloomed last year as the price of Bitcoin went up.
“It strikes me that we owe it to this generation to respect their enthusiasm about virtual currencies. However with a thoughtful and balanced response, not a dismissive one”.
He, however, said that there is a need for regulation against those misusing and abusing this enthusiasm with fraud and market manipulation.