On Tuesday, the Senate Banking Committee conducted a hearing on cryptocurrencies that included testimony from Commodity Futures Trading Commission (FCTC) Chairman Christopher Giancarlo and Securities and Exchange Commission (SEC) Chairman Jay Clayton. The two men testified about a wide variety of crypto-related topics, including regulations, ICOs, and distributed ledger technology.
Chairman Clayton focused much of his attention on concerns about initial coin offerings (ICOs), and explained why his agency tends to view ICO tokens as securities:
“In short, prospective purchasers are being sold on the potential for tokens to increase in value – with the ability to lock in those increases by reselling the tokens on a secondary market – or to otherwise profit from the tokens based on the efforts of others. These are key hallmarks of a security and a securities offering.”
Chairman Giancarlo told Senators that the CFTC does not currently regulate digital currency exchanges, and thus has no power to provide consumers with the types of protections they expect when dealing with securities like stocks. He did note, however, that the recent development of the Bitcoin futures market has provided his agency with new access to trading data that can help it better identify manipulation and fraud.
Giancarlo also expressed an understanding of the generational nature of digital currency innovation:
“We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one.”
After more than a month of bad news and price declines, many cryptocurrency advocates were understandably concerned that the Senate hearing might produce even more negative attention for the industry. Instead, the hearing’s observers were treated to a sober and informative discussion about digital currency, blockchain technology, and potential regulatory concerns.
