Earlier this week, the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) met in Washington D.C. to discuss their applicable roles in Blockchain, virtual currencies, and ICOs. The open-air session took place over two hours, and both sides were given an opportunity to put forward their opinion and views in the form of a testimony.

Prior to the meeting, J. Christopher Giancarlo who holds the position of chairman and witness for the CFTC, voiced his optimism in the field of Blockchain and the many ways in which financial institutions, charities, agriculture, social services, and logistics can all utilise the technology to benefit themselves and their operations. Giancarlo even went as far as to press for more freedoms for DLT and made numerous comparisons between it and 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 the development of the Internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology.”

Despite his enthusiasm, Giancarlo stated that the world of digital currencies was in need of more regulatory oversight, particularly when considering the threat of fraud and manipulation. He concluded by addressing both the SEC and CFTC and calling for them to not stifle the growth of this burgeoning sector. Calling virtual currencies, a “paradigm shift in how we think”, he stressed that this technology is not going anywhere and instead a way must be found to allow it to complement economic activity.

The chairman of the SEC, Jay Clayton was a little less enthusiastic about virtual currencies, but he stopped short of dismissing their vital role in a new, financial ecosystem.

“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 did, however, recognise that those who choose to actively partake in the opportunities that this technology provides, deserve to be protected by federal law and further regulation should be developed to protect these individuals from fraudsters and the like.

Recent studies have shown that as much as 10% of ICO funds raised have been lost to fraudsters and hackers, and this translates to a lot of investors losing a lot of money. Clayton address the recent step taken by Facebook to ban the advertising of ICOs on its platform and branded it a responsible step, adding that whilst it is important to pursue technological advancement, it should not be at the expense of the principles that govern the protection of investors and markets.

The SEC and CFTC have built a strong relationship and have both demonstrated that they are willing to work together to create a robust regulatory framework which will cover all aspects of DLT, ICOs, and virtual currencies. Whilst each area requires different levels of regulation, it is important that a one-size-fits-all approach is not adopted.

Both sides added, that whilst regulation is important, it is also imperative that education is provided to further assist in the overseeing of cryptocurrencies. It was also agreed that the best way to avoid negative situations around virtual currencies and DLT, is through the education of the masses, utilising currency jurisdictional powers over BTC to collect data and keep track of the markets, and to crack down on fraudsters who are scamming those partaking in ICO pyramid schemes, and worthless cryptocurrencies.

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