As we have already announced in our article this Morning, today has been 16 clock (German time) a much-acclaimed consultation of the American regulatory authorities, the SEC and CFTC before the U.S. Senate on the topic of crypto-currencies and ICOs. In particular, in periods in which there are only a few positive news from the world of crypto-currencies to reports, the statements of the SEC and CFTC, but from our point of view as very positive.
At the hearing before the US Senate, the Chairman of the Securities and Exchange Commission (SEC), Jay Clayton, and the Chairman of the Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo were, download.
Prior to the hearing, there were great expectations. In particular, it should be clarified what is the regulatory role taken by the SEC and the CFTC in the framework of the crypto-currency trading in the future. Because crypto currency exchanges are considered in the USA as the “Money Transmission Services”, SEC and CFTC currently has only investigative powers, but no regulatory powers.
Even if no concrete actions or regulatory approaches (which may affect, in our view, would have been positive) were announced in the framework of the hearing, the positive results from the hearing take. So both Clayton as well as Giancarlo at the hearing seemed tuned currencies positive effect on Crypto. Although both of US are planning authorities a greater role in the control of the crypto-currency market. Nevertheless, you do not want to forbid the technology and the market as a Whole in the long run.
The Testimonials from the SEC and CFTC
In the run-up to the consultation with very detailed Testimonial to the comments already submitted to the SEC and CFTC have been published. In particular, these give, in our view, a deeper insight into the perspectives of the SEC and CFTC on crypto-currencies and ICOs.
So, we can say that the CFTC is voted basically positive. In the Testimonial the CFTC highlights the potential of the Blockchain technology, in particular for the financial industry. According to the CFTC, the “Do no harm should be followed” strategy. So this was the right approach for the development of the Internet. Similarly, the CFTC believes that the “do no harm”approach to the currencies, as the right approach for Crypto. However, these require, according to the CFTC, a more stringent supervision by the Supervisory authorities in key areas, in particular in the dimensions and the area in which retail investors are to be affected. A ban is not coming, according to Giancarlo:
We are entering a new digital era in world financial markets. 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.
According to Giancarlo, there is a need for a balance of sound policy, regulatory oversight, and Innovation in the private sector. Only in this way can develop the new technologies responsibly, and to the development of the American economy and to the prosperity of the American people.
With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity. This hearing is an important part of finding that balance
The opinion of the SEC has focused, however, on the current Initial Coin Offering (ICO) Situation. This is according to the SEC, unsatisfactory, as there are numerous Scam and Fraud ICOs, the advantage of the current Hype and euphoria to the Blockchain-technology and so small investors to trick and steal from. The Mission of the SEC is to protect investors.
Jay Clayton explained in the framework of the Testimonials:
The CFTC and SEC, along with other federal and state regulators and criminal
authorities wants to continue to work together to bring transparency and integrity to
these markets and, importantly, to deter and prosecute fraud and abuse. These
markets are new, evolving and internationally. As such they require us to be
nimble and forward-looking; coordinated with our state, federal and
international colleagues; and engaged with important stakeholders, including
Furthermore, Clayton said in the Testimonial, the SEC and the CFTC see it as a Federal market Supervisory authorities tasked to create a regulatory environment for investors and market participants, which is innovation for companies as well as integrity and ultimately confidence for investors is ensured. In the Rest of its authority to apply any enforcement measures in the framework of the American Federal securities law in relation to ICOs, to punish violations and fraud. A General “suspicion” against all crypto currencies but there are.
The hearing before the US Senate by several senators
After a short introduction into the topic of crypto-currencies and ICO by Jay Clayton and J. Christopher Giancarlo, the two Chairpersons had to face the questions from various senators. The nearly two-hour hearing brought but few news compared to the Testimonials.
During interrogation, the two chairmen of the CFTC and SEC, in part rabble-rousing questions of the US senators saw themselves confronted with. Questions as to the intrinsic value of Bitcoin, or also information on the current price drop of over 60 percent compared to the Dow Jones (4.5 percent). The recent Hack of the Japanese CoinCheck exchange was led to Bitcoin to portray in a bad light.
Both Clayton as well as Giancarlo is right, the work of both authorities, which had already undertaken a number of successful measures to prevent cases of fraud are justified (e.g. against My Big Coin Pay Inc., The Entrepreneurs Headquarters Limited, and Coin Drop Markets).
In the framework of the survey, Giancarlo also expressed that the possibilities of the CFTC are of course limited, as there is for crypto-currency markets, no national boundaries, and this world operate. Hereby he was also on the G20 summit, the crypto is a topic of currencies will be to create a uniform worldwide regulatory measures.
All in all, brought to the hearing, so no groundbreaking findings. Nevertheless, from our point of view, something very positive can be taken from a hearing. The USA, after all, a role model for many of the global developments, especially for Europe, in contrast to China and South Korea is a “loose” policy towards crypto-currencies. These are not considered a threat (“do no harm”), but as an opportunity for innovation and investment potential.