Senate Cryptocurrency Hearing: Speakers Urge Pragmatic Regulation

Daniel Gorfine of the CFTC warned against being hasty in defining tokens.

The US government held its second official hearing on the subject of cryptocurrency regulation yesterday.

Specifically, the House Committee on Agriculture heard from a number of individuals from various fields pertaining to the industry.

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“It’s important that we’re not hasty”

Scott Kupor, Managing Partner of Andreessen Horowitz, a California-based venture capital company, said that he believes that the definition of a crypto-asset depends on its stage of development. An ICO looks like a traditional investment and is thus closest to being a security, but once the tokens are live they begin to look like assets and should be regulated by the CFTC.

Amber Baldet, co-founder and CEO of blockchain company Clovyr, argued that money is the main use of cryptocurrency (“money seems to be the killer app”) and because of that it is likely to take an ever increasing part in society. The government should take this opportunity to write balanced regulations.

She said that a digital US dollar could be as well regarded as the fiat dollar is today, and to this end, reference should be taken from the “anonymous, censorship-resistant features of open blockchain currencies” when designing it.

She said that the US elections should not be on a blockchain, because blockchain voting is a complex problem of computer/human coordination. As it stands the relatively simple computer system used in American elections has already being hacked.

Daniel Gorfine, Chief Innovation Officer of the Commodity Futures Trading Commission and Director of the watchdog’s fintech initiative LabCFTC, indicated that he believes in cautious regulation. He said that ICO money raising bears many hallmarks of a security and the SEC is looking into that, but the fact that commodities can now be represented as tokens means that these tokens should be regulated by the CFTC.

“It’s important that we’re not hasty in figuring out what the contours are of applying securities law and then the commodities framework,” he said.

His comments echo those of CFTC chairman J. Christopher Giancarlo who won the admiration of the cryptocurrency community by expressing some enthusiasm for cryptocurrency at an earlier government hearing in February 2018.

Lowell Ness, Managing Partner of the  Palo Alto office of Perkins Coie, a Seattle-based law firm, said: “One of the things I get asked a lot is, why don’t we just call these things securities?… The problem with that is they exhibit some characteristics of securities in certain phases and not in others.”

“We need to come up with a fairly novel and pragmatic approach,” he said.

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Gary Gensler, Senior Lecturer at MIT Sloan School of Management, asked those attending to raise their hands if they had invested in cryptocurrency, and found that around half had.

He said that he has found that cryptocurrency investment does not follow traditional political/economic/professional lines at all.

On the subject of regulation, he said that if the US drives off investors, it will be very difficult to bring them back.

A positive tone

Overall, the meeting had a positive tone. All of the speakers agreed that cryptocurrency has a place in the future of the economy and should be regulated, and all agreed that it is important for the regulation to be appropriate.

Cryptocurrency prices do not seem to have reacted at all to this positive development. This is a contrast to the aforementioned February hearing, which caused prices to jump.

Guy Hirsch, US Managing Director of eToro, commented on the hearing: “Today’s hearings are a great step in the right direction. We encourage regulators to hear more from good actors and companies with an international presence since they would be valuable to this discussion in Congress…. Any law that Congress will pass affecting cryptocurrencies will have global impact on foreign companies that are doing business in the US or want to enter the US market and therefore it is important for US lawmakers to facilitate dialogue with other nations on this matter.”

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