US Securities Regulators Looking for Guidance on Cryptocurrencies
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Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo and Securities and Exchange Commission (SEC) Chairman Jay Clayton will call attention to potentially dangerous gaps in rules for trading digital currencies when they appear together Tuesday at a Senate Banking Committee hearing, according to copies of their prepared testimony revealed to the media Monday.
To the extent that virtual currency exchanges are regulated in the US, if at all, they are governed by state rules designed for money transmission services.
Authorities have become concerned in light of recent events such as the admission by a Japanese exchange that it had been hacked and more than $500-M in digital tokens were stolen.
“The currently applicable regulatory framework for cryptocurrency trading was not designed with trading of the type we are witnessing in mind,” Mr. Clayton said in his prepared remarks. “As Chairman Giancarlo and I stated recently, we are open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate.”
Messrs Giancarlo and Clayton are trying to balance a desire to promote the kind of innovation that blockchain technology represents against the need to protect investors.
At Tuesday’s hearing on virtual currency oversight, they will aim to assure lawmakers that they are doing both.
The SEC has been focused on ICOs (initial coin offerings), which Mr. Clayton has said are often securities offerings that should be registered with the SEC. To date, none have completed that process.
The CFTC identified Bitcoin as a commodity in Y 2015 and has used its anti-fraud authority to bring enforcement cases against platforms offering Bitcoin trading.
The agency is also charged with overseeing Bitcoin futures contracts after 2 LaSalle Street exchanges brought them to market last year.
In his statement, Mr. Giancarlo said the CFTC’s authority is limited to derivatives markets. He noted that spot market exchanges, where much of the trading occurs, does not fall under any federal regulators’ jurisdiction.
“Current law does not provide any US federal regulator with such regulatory oversight authority over spot virtual currency platforms,” he said.
Notably, India is now planning to ban cryptocurrencies as a form of payment.