CFTC & SEC Meeting

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The Commodity Futures Trading Commision (CFTC) and US Securities and Exchange Commision(SEC)  met this morning in Washington D.C. at the Senate building for about two hours.  On the docket this morning was the blockchain, ICO’s and virtual currencies. The purpose of the meeting was to begin discussions on the role of the U.S. Gov’t in the crypto space. The first order of business was testimonies from some key players of both the CFTC and the SEC.

The Pre-Testimonies

J. Christopher Giancarlo, chairman of the CFTC, is very optimistic on blockchain technology. Gincarlo wrote a page and a half document and geared it towards agriculture, social services, banks and many other avenues of business. He believes all parties can definitely benefit from it. He goes as far as comparing it to the internet.

“This simple approach is well-recognized as the enlightened regulatory underpinning of the Internet that brought about such profound changes to human society. During the almost 20 years of “do no harm” regulation, a massive amount of investment was made in the Internet’s infrastructure. It yielded a rapid expansion in access that supported swift deployment and mass adoption of Internet-based technologies. Internet-based innovations have revolutionized nearly every aspect of American life, from telecommunications to commerce, transportation and research and development. [“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. “

He does agree that there needs to be some regulation because of the manipulation and fraud but he does believe there is definite room for growth.

“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.”

The next testimony is by the chariman of the SEC who is not as excited as his counterpart. He does admit their is a role for the technology though.

“To be clear, I am very optimistic that developments in financial technology will help facilitate capital formation, providing promising investment opportunities for institutional and Main Street investors alike. From a financial regulatory perspective, these developments may enable us to better monitor transactions, holdings and obligations (including credit exposures) and other activities and characteristics of our markets, thereby facilitating our regulatory mission, including, importantly, investor protection.”

he also briefly talked about the fraud and manipulation:

“At the same time, regardless of the promise of this technology, those who invest their hard-earned money in opportunities that fall within the scope of the federal securities laws deserve the full protections afforded under those laws. This ever-present need comes into focus when enthusiasm for obtaining a profitable piece of a new technology “before it’s too late” is strong and broad. Fraudsters and other bad actors prey on this enthusiasm.”

A study that was conducted has shown 10% of all ICO proceeds have been lost to fraud. The fear is investors who are not educated enough and do not understand the technology will be taken advantage of. There was also mention of the recent facebook ban.

So What Is The Verdict?

Both Clayton and Giancarlo have agreed to  try and work together to come up with a regulatory framework. The belief is distirbuited ledger technology needs the least regulation while on the other hand ICOS need the most.

 They do know the importance of bitcoin and crypto currencies especially on how important they are to the DLT. Without the coins the DLT would not exist.

They were in agreement that in order to regulate more research will need to be done but would be difficult as they do not have the funds to hire.

There wasn’t much talk at all about tax regulation which we thought would be talked about more.

They feel that the best solution is to:

  • Educate everyone about cryptocurrencies

  • Use the jurisdiction that they have over the futures markets of Bitcoin to collect data and keep track of the markets so that nobody gets too hurt

  • Go after the scammers who are utilizing ICO pyramid schemes to steal money.

    They are keen on being a leader in this space as nobody else has really stood up to back it. They see the benefits and how much money can be made here and feel they can benefit. It is hard for them at this point to not support it. They might as well capitalize and ride the train!

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