The SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission) hearing and what it means for USA cryptocurrency regulations
On Monday February 6, 2018, the chairmen of both organizations mentioned above appeared before the Committee on Banking, Housing, and Urban Affairs within the United States Senate (made up of 23 senators: 12 republican, 11 democrat), to discuss the current cryptocurrency climate and to provide findings on the proper course of regulation moving forward.
There was much speculation on the direction that this hearing may take, as the SEC has been known to be very strict with investments that may be seen as risky or fraudulent. Fortunately for those who embrace cryptocurrency and blockchain technology, today’s testimony is something that should seen as a step on the path of proper regulation, and could be the inception of a regulatory blueprint that could be implemented throughout the USA, Europe and beyond.
First and foremost, the SEC chairman, Jay Clayton, has made a clear distinction between ICO tokens and other
established cryptocurrencies. He has called ICO tokens securities, while calling others “true cryptocurrencies.” Clayton also stated that any unregistered ICO is in violation of the Securities Act of 1933 and that ICOs sold to US persons can be subject to action by the SEC without the statue of limitations. When Clayton was asked how many ICOs actually registered, he responded with “not one.“
He also brought up the notion that “virtual currencies mark a paradigm shift in how we think about payments, financial processes, and economic activity.”
The CFTC chairman, Christopher Giancarlo, was also very bullish regarding his comments and suggestions, stating: “We owe it to this new generation, to respect their interest in this new technology with a thoughtful regulatory approach.” Giancarlo also expressed his feeling that Bitcoin does have intrinsic value, because of its ability to be mined, and that it should be left alone to grow, alongside regulating illegal activity in the space, such as ICO scams.
Not only did these two chairmen seem to have an
optimistic outlook on the future of this space; the senators on the panel were relatively outspoken in their opinions on the direction of blockchain and cryptocurrency. Senator Mark Warner (D-VA) contributed by comparing the current crypto markets to the rise of cellular phones throughout the 1980’s, tweeting: “I was an early investor in cell phones back in the ’80s, and I believe #blockchain has the potential to be just as transformational as cell phones. As our government begins to look at #crypto, I don’t think you can separate #cryptocurrencies from the technology they’re based on.” He followed these comments with the observation that if these markets can continue at the current growth rate that has been seen over the past year, then the entirety of the market will go from a current $300-400m market cap to potentially $20 trillion by the end of 2020.
To summarize the hearing, it appears that the SEC/CFTC testimony is largely a supportive and bullish sign. They do not wish to implement any kind of ban on trading or owning cryptocurrencies, and they aren’t looking to ban exchanges, as long as the exchange follows the Know Your
Customer rules along with potential future regulations that will protect consumers. At this point, the SEC wants to take a ‘do no harm’ approach to regulating this space, and much like the early days of the Internet, over-regulation may be a detractor to private and public sector innovation.
Although this news can be seen as positive sentiment in the space, it’s probably too early to be buying the news in the current climate we are in. The so-called ‘market makers’ may use this news as an opportunity to short-sell into new buyers and to possibly create lower lows at which ‘X’ currency could be acquired even cheaper.
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