If the chiefs of the US securities and commodities regulators get their way, cryptocurrency markets will soon be regulated similarly to traditional financial markets.
Testifying before members of the Senate Banking, Housing and Urban Affairs Committee on Tuesday morning, Securities and Exchange Commission chairman Jay Clayton and Commodities and Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo stated that cryptocurrency markets in the US require a coordinated regulatory scheme, and that the feds may need more power to enforce the rules.
“We should all come together,” SEC chief Clayton said during question period, “the federal banking regulators, the CFTC and SEC—there are states involved as well—and have a coordinated plan for dealing with the virtual currency trading market.”
“We must put in place sound regulatory frameworks,” CFTC chairman Giancarlo said during his testimony.
Committee Chairman Mike Crapo asked Clayton if he thought the SEC might need additional legislative powers to get the job done. “I think we may,” Clayton curtly replied, without elaborating on what these powers might be.
Tuesday’s Senate hearing was the long-awaited denouement following months of activity by Clayton’s SEC, which has recently issued fiery statements warning investors of the dangers of cryptocurrencies and digital fundraisers called Initial Coin Offerings while filing numerous actions against scammers.
In Clayton’s full testimony, released on Monday evening, the chairman stated that cryptocurrencies “can provide investors with new opportunities to offer support and capital to novel concepts and ideas.” He also condemned malicious ICOs and stated that most offerings are securities that fall under the SEC’s purview.
Clayton reiterated the statement in his testimony on Tuesday, saying, “I believe every ICO I’ve seen is a security.” He noted in his full testimony that no ICOs have registered with the SEC to date.
“I don’t think the gatekeepers that we rely on to assist us in making sure our securities laws are followed have done their job.” Clayton said. “Folks somehow got comfortable that this was new and it’s OK, they’re not securities, that they’re just another way to raise money, but I disagree.”
“I am understanding you that this is a violation of the law?” Senator Elizabeth Warren asked Clayton. “Yes,” he answered.
“I can’t pre-judge an issue that may come before the SEC,” Clayton said. “But I’m not anxious to see a change in this area.”
Committee Ranking Member Sherrod Brown also encouraged Clayton and Giancarlo not to “forget [their] day jobs” taking on Wall Street and big banks.
Currently, cryptocurrency regulations in the US are a patchwork of rulings and state regulations, and the message from the SEC and CFTC is clear: The US needs a unified federal regulatory regime for a technology that’s still in its Wild West phase.
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