SEC Chairman Jay Clayton stated at the beginning of the recent hearing on cryptocurrency regulation that both he and J. Christopher Giancarlo, Chairman of the United States CFTC, were “supportive of regulatory and policy efforts to bring clarity and fairness to this space” — a remark that Reuters referred to as “the strongest indication yet that federal authorities are mulling new laws to scrutinize virtual currency trading and investing.”
Additionally, in response to Idaho Senator Michael Crapo’s question about whether or not they believe that a single regulatory body should be formed for the cryptocurrency industry, both of the chairmen said that they believed that the introduction of new legislation could be necessary in the future.
However, neither of the chairmen gave much indication that any possible regulations would aim to choke or stamp out crypto–to varying degrees, both seemed to show genuine interest in the blockchain space and the possibilities that the technology could bring to the US government and economy. Regulatory concerns expressed by both were concerned with toward clamping down on fraudulent activity.
In Theory, Clayton is Harsh on Illegitimate ICOs–But in Practice?
In his opening remarks, Clayton noted that there is a definite need for crypto regulation to protect consumers. The chairman acknowledged that a great deal of the ICOs being conducted in the token space today are outside of the law, and not because the law is unclear. “I believe every ICO I’ve seen is a security…You can call it a coin but if it functions as a security, it is a security,” he said.
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Clayton continued to say that “those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision.”
However, there was a bit of friction between Clayton and Senator Elizabeth Warren of Massachusetts, who asked both of the chairmen about a Bloomberg article claiming that the SEC was considering permitting companies to hold ICOs while forbidding the filing of class action lawsuits against them. Clayton’s response to her question was vague and inconclusive.
Later in the hearing, Warren asked Clayton about how many of the ICOs on the immediate horizon have registered with the SEC; Clayton conceded that none of them had. When she asked him why this was the case, Clayton gave another rather murky response, saying that token sales need to remain within the law.
The US Government Understands Crypto Basics, but There Are Still Lots of Unknowns
The Trump administration has shown what many consider to be a rather surprising amount of interest in blockchain technology. Among several other officials, newly appointed chairman of the Federal Reserve Jerome Powell has expressed his own cautious interest in blockchain in the past.
The chairmen echoed Powell’s restrained enthusiasm, but both acknowledged that there are quite a few unknown factors. While both of them seem to have a pretty clear understanding of the distinction between cryptocurrencies, ICOs, and distributed ledger technology, they did not seem to shy away from admitting that many things were unclear.
The chairmen conceded to the Ohio Senator that the extent of the contribution of US residents to the $4 billion raised through ICOs throughout the past year was unknown; Clayton admitted to Senator Tom Cotton of Arkansas that he “[didn’t] really know” what was driving the underlying value of blockchain technology.