US Regulators Testify On Virtual Currencies And ICOs

US Regulators Testify On Virtual Currencies And ICOs

The heads of both the Securities and Exchange Commission and the Commodity Futures Trading Commission in the United States testified yesterday before the US Senate’s banking committee in relation to the subject of oversight of virtual currencies and ICOs.

Both testimonies have just been formally released into the public domain, and offer encouraging insights into the respective approaches being taken by both regulatory bodies. 

Ignoring Crypto “not a responsible regulatory response”

Jay Clayton, the head of the SEC, emphasised that regulations needed to preserve innovation while protecting investors.

He said that the Howey Test was still an effective point of reference in deciding whether investments should be classified as securities. Clayton also pointed out that it is possible to conduct an offer and sale of securities without triggering the SEC’s registration requirements.

Christopher Giancarlo, head of the CFTC,  echoed many of the same points. He suggested a “do no harm” registration process for distributed ledger and cryptocurrency companies and start-ups.

His testimony concludes with the following statement: “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 pair also pointed out several concerns. Among these were the use of leverage by cryptocurrency traders. The SEC is also concerned by the number of bad actors using ICOs as a means to dupe unsuspecting investors, particularly with promises of high returns.

Analysts are interpreting these testimonies as positive. Both regulatory bodies appear keen to accommodate virtual currencies, blockchain companies and initial coin offerings. This approach is in stark contrast to China, who recently doubled down on their cryptocurrency ban.