The chairman of the U.S. Commodity Futures Trading Commission (CFTC) has spoken of the need for balance and a "do no harm" approach when regulating cryptocurrencies. '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, 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.
As governments and regulatory agencies around the world threaten regulation to limit cryptocurrencies, the heads of the two biggest trading venues in the United States maintained a largely conciliatory posture towards them.
In their Congressional testimonies to discuss cryptocurrency regulation, SEC Chairman Jay Clayton and CFTC head Christopher Giancarlo. Both came out in favor of cryptocurrencies and highlighted their efforts to curtail fraud and scams in the ecosystem.
“We owe it to this new generation to respect their interest in this new technology with a thoughtful regulatory approach,” said CFTC’s Christopher Giancarlo.
Both agencies have cracked down on several cases where investors have been scammed or were offered incomplete information prior to investment. A critical testimony of cryptocurrency markets would have further roiled the crypto markets, which have already shed 35.6% of their market capitalization in the last week on the back of negative regulation news from China, South Korea, and India. At 17:02 UTC, the price of a single bitcoin was $7,021.74, up 2.61% from 24 hours ago.
Giancarlo said bitcoin has the characteristics of both a commodity and a security. But that is a non-issue for the CFTC currently because it does not have regulatory power over cash markets for cryptocurrencies. Instead, the agency is focused on enforcement action in cryptocurrency markets.
“Individually and collectively, we (government agencies) are understanding our authority and this technology,” said Giancarlo. He also pointed to the agency’s Virtual Currency Enforcement Taskforce, which policies virtual currencies and pump-and-dump schemes.
SEC Chairman Clayton also highlighted the SEC’s cryptocurrency working group, which consists of a combination of economists and technologists, to predict the future directions of digital currencies. In the past, he has cautioned investors about the pitfalls of investing in initial coin offerings (ICOs). “If people are getting ripped off, that presents reputational and systemic risk,” Clayton said today. According to him, his warning about the liabilities regarding celebrity endorsement of ICOs has “tamped down” ICO promotions by stars.
Clayton was blunt in his answer to the question of why prices are volatile: "I don’t really know what’s driving volatility in bitcoin and cryptocurrencies," he said, going on to remark:
"[Cryptocurrencies are] not correlated with sovereign currencies, so it must be something different than what would move the dollar. But that's one of the issues before us – there does appear to be a lot of volatility compared to the medium they are supposed to be replacing.”
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