Should Bitcoin Be Illegal? SEC Asks Government To Regulate Cryptocurrency Trading

The heads of the United States’ top securities and commodities regulators told the Senate on Tuesday that cryptocurrency markets require a coordinated regulatory effort and asked for help in setting up and enforcing the necessary framework.

The request from Securities and Exchange Commission chairman Jay Clayton and Commodities and Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo came while the pair were testifying before members of the Senate Banking, Housing and Urban Affairs Committee.

During the hearing, the SEC chair recommended that all parties including federal banking regulators, the CFTC, SEC and state regulators come together to create “a coordinated plan for dealing with the virtual currency trading market.”

Clayton—who has led the SEC as the agency has attempted to crack down on illegal and predatory activity that has stemmed from illicit parts of the cryptocurrency markets—encouraged taking additional action to help regulate the newly popular forms of digital currency like bitcoin, ethereum and many others.

In his testimony , the SEC head took aim at initial coin offerings (ICOs) that provide investors with digital tokens in exchange for a cash investment into the company with the promise that the tokens will eventually gain value if the business succeeds. ICOs have also become notorious for being used as tools for scammers looking to take investor money and run.

“Some have taken advantage of this lack of understanding and have sought to prey on investors’ excitement about the quick rise in cryptocurrency and ICO prices,” Clayton said. “There should be no misunderstanding about the law. When investors are offered and sold securities—which to date ICOs have largely been—they are entitled to the benefits of state and federal securities laws and sellers and other market participants must follow these laws.”

Clayton noted that no ICO has registered with the SEC and the agency also has not approved any not approved for listing and trading any exchange-traded products such as ETFs that hold cryptocurrencies.

“I don’t think the gatekeepers that we rely on to assist us in making sure our securities laws are followed have done their job.” Clayton said. “Folks somehow got comfortable that this was new and it’s OK, they’re not securities, that they’re just another way to raise money, but I disagree.”

Clayton’s counterpart, CFTC chairman Giancarlo, was not as harsh in his testimony and urged a “do no harm” approach to regulating blockchain technology in order to allow it to blossom and grow—though he noted that virtual currencies would require stricter regulation.

“Virtual currencies, however, likely require more attentive regulatory oversight in key areas, especially to the extent that retail investors are attracted to this space,” he said.

Clayton wasn’t entirely critical, noting that cryptocurrencies “can provide investors with new opportunities to offer support and capital to novel concepts and ideas.” However, when asked if the SEC might require additional legislative powers to regulate cryptocurrency markets, Clayton said simply, “I think we may.”