The world has been waiting for the United States to take an official stance on cryptocurrency and regulation. A US Senate Committee met yesterday to discuss findings from research into cryptocurrency and potential regulation, presented by chairmen representing the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). The findings from SEC Chairman John Clayton and CFTC Chairman J. Christopher Giancarlo were widely viewed as positive for cryptocurrency, taking a “do no harm” approach and even comparing cryptocurrencies to the Internet in terms of potential technological revolution.
Chairman Giancarlo opened the session with a story of his three college-aged children, and their enthusiasm for cryptocurrencies, citing their sentiment matches other millennials who are keen to invest, but put off by Wall Street and stocks.
Later in the report, an entire page and a half was dedicated to outlining the potential benefits of cryptocurrency and it’s underlying blockchain technology. Giancarlo’s report states:
“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.”
Giancarlo was quick to point out, though, that a more “attentive” approach was necessary to curb “fraud and manipulation”. The report further explains that leaving room for growth is vital for this new market and underlying technology to thrive:
“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.”
SEC Chairman John Clayton had similar sentiments about cryptocurrency in general, but took a tougher stance on ICOs and spoke of the danger of scams and fraud, noting that despite the promise, investors shouldn’t ignore key principles in safe investing and states the SEC will take steps to protect investors.
“Simply said, we should embrace the pursuit of technological advancement, as well as new and innovative techniques for capital raising, but not at the expense of the principles undermining our well-founded and proven approach to protecting investors and markets.”
Clayton clarified that despite taking a strong measure against ICOs, there’s still a general enthusiasm and promise seen in cryptocurrency and distributed ledger technology.
“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.”
These statements made in front of the Senate sent a message to the entire cryptocurrency and investment community, that cryptocurrency and blockchain are here to stay, but the implications are still not fully understood at this time. The CFTC and SEC have built a “strong relationship” that’s geared toward understanding the effect cryptocurrencies will have on society - both positive and negative - and use their findings to shape future regulation and inform the masses on the potential benefits and pitfalls of the emerging technology and investment opportunities.
This overwhelmingly positive news from the USA couldn’t have come at a better time. The month of January saw repeated negative press and FUD, triggering the beginning of the 2018 cryptocurrency crash, which has only accelerate thus far in February. Following the total crypto market cap value’s rapid decent from 800 billion to under 300 billion, good news is needed to start a reverse in this downtrend. Since the release of these statements and reports from the Senate session, the cryptocurrency total market cap saw a resurgence, adding over 100 billion in under 24 hours.