One of the nation’s top financial regulators pressed for greater coordination on regulating trading of cryptocurrencies at a hearing Tuesday.
“We should all come together, the federal banking regulators, the [Commodity Futures Trading Commission] and [Securities and Exchange Commission] — there are states involved as well — and have a coordinated plan for dealing with the virtual currency trading market,” Jay Clayton, chairman of the Securities and Exchange Commission (SEC), told the Senate Banking Committee.
Clayton testified alongside Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, as lawmakers pressed them on steps they are taking to regulate bitcoin and other cryptocurrencies.
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The hearing comes as interest in the currencies has boomed, with many coins reaching record highs before a recent slump in the market.
Currently, cryptocurrencies are regulated by the CFTC as commodities, but the digital markets on which they are traded have no clear regulatory oversight.
The SEC chief also said his agency planned to take a closer look at initial coin offerings (ICOs), digital coins released by companies to raise funds.
Clayton said most appeared to be securities and that put them in the agency’s crosshairs.
“From what I’ve seen, initial coin offerings are securities offerings. They are interest in companies, much like stocks and bonds, under a new label,” he said.
“Many ICOs are being conducted illegally,” he said. “They are not following securities laws. Some say that this is because the law is not clear. I don’t buy that for a moment.”
His comments were his most critical on ICOs to date. The SEC has taken regulatory action against ICOs it believes are actually securities, however, his comments Tuesday suggest regulators will ramp up enforcement. Previously, Clayton had hinted that some ICOs functioned as securities.
Clayton’s comments may spark pushback from digital currency advocates.
The SEC head also addressed questions on why the agency has not approved cryptocurrency-based exchange-traded funds (ETFs), which would allow consumers to invest in digital currencies without directly purchasing them.
“We’ve made it clear to the marketplace that there are a couple of issues with having an ETF that’s based on a cryptocurrency,” Clayton said. “They go to price discovery, custody and some other issues around volatility.
“We don’t want to approve an ETF with a cryptocurrency underlying it until we can get comfortable with those issues,” he added.
Lawmakers at the hearing pressed regulators to take a closer look at cryptocurrencies and ICOs and to do more to protect consumers and investors. But they did not come down in favor of any specific regulations.
Senators did express interest in the potential for the new technologies.
“I think we may be on top of something that is transformational,” said Sen. Mark Warner (D-Va.).