Senate cryptocurrency hearing strikes a cautiously optimistic tone

In a hearing today before the Senate Banking Committee, Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman Christopher Giancarlo opened up about what the near-term U.S. regulatory fate of cryptocurrency might look like. In a week of plunging prices and bad news, the hearing struck a tone that coin watchers could reasonably interpret as surprisingly optimistic.

Over the course of the open hearing, Clayton and Giancarlo traded testimony over what canbe regulated, what should be regulated and how, while offering a broader outlook on the long-term future of virtual currency markets and blockchain tech.

The testimony drew a useful distinction among three pillars of the virtual currency ecosystem (for lack of a better unifying term): cryptocurrencies, “a replacement for dollars;” ICOs, “like a stock offering;” and distributed ledger technologies, or the technical framework generally known as blockchain.

Throughout the hearing, on the SEC side, Clayton struck a relatively solemn tone focused on ICO fraud concerns, while the CFTC’s Giancarlo came across as genuinely enthusiastic and curious about the emerging market.

On a question of the intrinsic value of cryptocurrency:

Giancarlo defended Bitcoin’s value, explaining the process of mining and how it correlates with price (or sometimes breaks from that correlation, as economists he cited have suggested).

Clayton on the same question:

There are a lot of smart people who think there’s something to the value of cryptocurrency and the international exchange and I’m not seeing those benefits manifesting themselves in the market yet. I look at this from the perspective of Main Street investors and they should understand that.

Clayton made further comments casting doubt on the usefulness of cryptocurrencies as currency, citing common concerns around how market volatility makes transactions difficult.

On advantages of a Bitcoin futures market:

“The CFTC can now obtain trading data and analyze it for fraud and manipulation,” Giancarlo said.

“…With Bitcoin futures we’re now having visibility into underlying markets and spot markets that we would not otherwise have.”

Concerns around consumer misconceptions of cryptocurrency trading platforms:

Both chairmen expressed concerns about the unregulated nature of cryptocurrency exchange platforms and their potential to mislead consumers into believing that a regulatory net of some kind exists…

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