This week, testimony regarding cryptocurrency and its regulation was offered before the US Senate Banking Committee. The chairman of the US Commodities Futures Trading Commission (CFTC) has provided insight into how the agency will handle cryptocurrencies. In what is has been the most enlightened, dare-we-say supportive, view of the Distributed Ledger Technology (“DLT”) industry and its associated currencies to date, CFTC Chairman J. Christopher Giancarlo indicated that the CFTC will be taking a “do no harm approach” when dealing with DLTs. In testimony presented to the US Senate Banking Committee on February 6, 2018, US CFTC chairman J. Christopher Giancarlo said:
“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. … With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity.”
From his testimony, it is appears that the CFTC is taking an near supportive view of the industry, likening it to the development of the internet! To our knowledge no other ranking official in the federal government has taken such an enlightened stance so publicly. The Rodman Law Group applauds Chairman Giancarlo and urges that other agencies and their senior staff (looking at you IRS) strive to educate themselves so that they too will recognize the utility and revolutionary features of the DLT, Blockchain, and Cryptocurrency, industries. The internet would not have thrived had it been burdened with onerous regulations or been the subject of governmental witch-hunts.
As the SEC has noted numerous (far too many) times, the protection of consumer and investors is important, but that should NOT be the sole focus of any government agency. We believe that the more support the industry is given, and the more it is permitted to grow and evolve organically, the less fraud will be committed, but our greatest hope is that the regulators will eventually recognize that transparency and consumer protections are already integral components of most open source DLT projects, and that through the use of smart contracts, such as the ones provided for in ERC20 tokens, we will inevitably have assets/currencies that have consumer protections baked into them through their code and cryptography. Malfeasance would be theoretically impossible, and perhaps the financial industry will need progressively less and less SEC regulation in general.
Giancarlo fielded questions about the status of cryptocurrency, including whether bitcoin is a commodity, security, or some blend of the two. While he provided an explanation that indicated that he views them as belonging to many asset classes, he eventually said that when you approach bitcoin as a store of value (such as silver or gold), bitcoin acts “very much like a commodity.” This should provide the market with some comfort and lessen the fear of the dreaded Howey Test.
Giancarlo indicated that blockchain technology has “enormous potential.”
This is something that we can affirm as RLG represents several DLT based clients around the globe, such as Intelligent Trading Technologies, and all of them are examples of organizations that are actively and ethically utilizing this technology, and who are offering real value to their token holders.
Tom Counsell, of Intelligent Trading Technologies, had this to say of their value proposition:
“Trading intelligently, especially in the crypto space, requires a near perfect union between man and machine. Intelligent Trading Technologies has developed algorithms that run millions of computations per second and combine them with sentiment analysis to deliver concise and actionable trading alerts to our token holders so that they can maximize their trading successes and minimize the time they spend trading.”
This is a perfect example of a company using the DLT structure to design and provide a product that investors desperately need, in a manner that could not have been achieved as effiecntly (if at all) without the use of a DLT, in this case the Ethereum Blockchain. ITT is on track to truly help investors be more succesfull in their endevours and to hopefully avoid ruining the portfolios due to lack of attention or lack of knowledge… are you listening regulators? Isn’t that the whole damn point?
It wasn’t all good news though, as the consistently dour Securities and Exchange Commission (“SEC”) head Jay Clayton also provided testimony to the Senate on February 6, and indicated that the SEC is specifically looking at ICOs as being securities offerings, something that has been much discussed and debated by those in the industry. “ICOs that are securities offerings; we should regulate them like we regulate securities offerings, end of story,” he said.
While some ICOs absolutely do have the features of an IPO and that no matter the name of the asset (token, coin, currency) it is actually a security, It would seem like Mr. Clayton could use a crash course in token programming, should attend some industry events and maybe learn a thing from Chairman Giancarlo.
Overall The Rodman Law Group, LLC welcomes, and applauds Chairman Giancarlo’s testimony and is hopeful he will maintain this view. RLG has been a staunch supporter of the cryptocurrency movement since its inception, and appreciates that the CFTC appears to have a progressive stance on the industry.
By all accounts, regulation has been welcome in the crypto markets, as regulation provides structure and guidelines for companies attempting to enter the industry and ensures the strength of trust relationships built between customers and companies. The industry does not want to fall prey to bad actors, and as such, most companies operating in the space are extremely concerned with the well-being of their clients, and their own compliance with any existing laws and regulations.
We look forward to helping to facilitate excellent communication between crypto companies and regulatory agencies in the future.
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