𝓢𝓮𝓷𝓪𝓽𝓮 𝓡𝓮𝓵𝓮𝓪𝓼𝓮𝓼 𝓣𝓮𝓼𝓽𝓲𝓶𝓸𝓷𝓲𝓮𝓼 𝓐𝓱𝓮𝓪𝓭 𝓸𝓯 𝓒𝓻𝔂𝓹𝓽𝓸 𝓗𝓮𝓪𝓻𝓲𝓷𝓰

𝐀 𝐝𝐚𝐲 𝐛𝐞𝐟𝐨𝐫𝐞 𝐚 𝐥𝐚𝐧𝐝𝐦𝐚𝐫𝐤 𝐡𝐞𝐚𝐫𝐢𝐧𝐠, 𝐚 𝐝𝐚𝐲 𝐰𝐢𝐭𝐡 𝐬𝐜𝐫𝐞𝐚𝐦𝐢𝐧𝐠 𝐡𝐞𝐚𝐝𝐥𝐢𝐧𝐞𝐬 𝐚𝐛𝐨𝐮𝐭 𝐭𝐡𝐞 𝐔𝐒 𝐬𝐭𝐨𝐜𝐤 𝐦𝐚𝐫𝐤𝐞𝐭’𝐬 𝐡𝐢𝐬𝐭𝐨𝐫𝐢𝐜 𝐝𝐮𝐦𝐩, 𝐧𝐨𝐭 𝐭𝐨 𝐦𝐞𝐧𝐭𝐢𝐨𝐧 𝐛𝐢𝐭𝐜𝐨𝐢𝐧’𝐬 𝟔𝟓 𝐩𝐞𝐫𝐜𝐞𝐧𝐭 𝐟𝐢𝐫𝐞 𝐬𝐚𝐥𝐞, 𝐭𝐡𝐞 𝐔𝐧𝐢𝐭𝐞𝐝 𝐒𝐭𝐚𝐭𝐞𝐬 𝐒𝐞𝐧𝐚𝐭𝐞 𝐫𝐞𝐥𝐞𝐚𝐬𝐞𝐝 𝐟𝐨𝐫𝐦𝐚𝐥 𝐭𝐞𝐬𝐭𝐢𝐦𝐨𝐧𝐲 𝐨𝐟 𝐂𝐡𝐚𝐢𝐫𝐬 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐒𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐚𝐧𝐝 𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞 𝐂𝐨𝐦𝐦𝐢𝐬𝐬𝐢𝐨𝐧 (𝐒𝐄𝐂) 𝐚𝐧𝐝 𝐂𝐨𝐦𝐦𝐨𝐝𝐢𝐭𝐲 𝐅𝐮𝐭𝐮𝐫𝐞𝐬 𝐓𝐫𝐚𝐝𝐢𝐧𝐠 𝐂𝐨𝐦𝐦𝐢𝐬𝐬𝐢𝐨𝐧 (𝐂𝐅𝐓𝐂). 𝐇𝐞𝐚𝐝𝐬 𝐨𝐟 𝐛𝐨𝐭𝐡 𝐞𝐧𝐭𝐢𝐭𝐢𝐞𝐬 𝐰𝐢𝐥𝐥 𝐭𝐞𝐬𝐭𝐢𝐟𝐲 𝐓𝐮𝐞𝐬𝐝𝐚𝐲 𝟔 𝐅𝐞𝐛𝐫𝐮𝐚𝐫𝐲 𝐛𝐞𝐟𝐨𝐫𝐞 𝐭𝐡𝐞 𝐂𝐨𝐦𝐦𝐢𝐭𝐭𝐞𝐞 𝐨𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠, 𝐇𝐨𝐮𝐬𝐢𝐧𝐠, 𝐚𝐧𝐝 𝐔𝐫𝐛𝐚𝐧 𝐀𝐟𝐟𝐚𝐢𝐫𝐬 𝐭𝐨 𝐝𝐢𝐬𝐜𝐮𝐬𝐬 𝐭𝐡𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐨𝐟 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐢𝐧𝐠 𝐜𝐫𝐲𝐩𝐭𝐨𝐜𝐮𝐫𝐫𝐞𝐧𝐜𝐢𝐞𝐬. 𝐀𝐟𝐭𝐞𝐫 𝐭𝐨𝐝𝐚𝐲, 𝐭𝐡𝐞𝐲’𝐫𝐞 𝐠𝐨𝐢𝐧𝐠 𝐭𝐨 𝐡𝐚𝐯𝐞 𝐩𝐥𝐞𝐧𝐭𝐲 𝐭𝐨 𝐝𝐢𝐬𝐜𝐮𝐬𝐬.

𝑺𝒆𝒏𝒂𝒕𝒆 𝑻𝒆𝒔𝒕𝒊𝒎𝒐𝒏𝒚 𝒐𝒇 𝑺𝑬𝑪 𝑪𝒉𝒂𝒊𝒓 𝑪𝒍𝒂𝒚𝒕𝒐𝒏
Bitcoiners are looking for any signs of positive news at this point. Set for a 10am Winter hearing Tuesday in the United States Senate Dirksen office building, two of the most powerful regulators in the cryptocurrency space will formally enter their testimony. Titled, Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, both Jay Clayton of the SEC and the CFTC’s J. Christopher Giancarlo will face lawmakers who are openly worried about the brave new future of cryptocurrencies such as bitcoin.

This particular committee is chaired by Mike Crapo and ranking member Sherrod Brown, and is made up of 23 members total (12 Republican, 11 Democrat). In the US, each state, of which there are 50, receive 2 Senate seats, making the upper, more deliberative body a pound-for-pound most powerful institution in a nation of more than 325 million people. That a quarter of the Senate gets a chance to weigh in on the topic of bitcoin and cryptocurrency, less than 24 hours after one of its biggest crashes, is bound to make news. It’s also a highly charged political year, as Republicans have a hold on the Senate majority heading into the November off-year elections, and both parties are looking for the slightest vulnerability in the other.

Chairman Jay Clayton of the SEC, 51, was nominated by President Trump over a year ago and assumed office last Summer. The SEC had been largely hands-off in the crypto space, and was notoriously reticent about its supposed role in bitcoin’s mainstreaming. No more. Under Mr. Clayton, the SEC became very active late last year, prosecuting bad actors and making more public statements than in prior years. It has slowed approval of what many believed would be key to the digital asset’s success, bitcoin ETFs.

Chair Clayton’s formal testimony entered into the record of the Senate, and pro-forma released to the public a day prior, is a Rorschach test for readers. Bitcoiners can take away a largely balanced, unsurprising approach from the SEC: the agency feels well entitled to regulate the space where it finds securities, especially when it comes to initial coin offerings and other less tested leveraging mechanisms. “I am particularly concerned,” Mr. Clayton wrote, “about market participants who extend to customers credit in U.S. dollars – a relatively stable asset – to enable the purchase of cryptocurrencies, which, in recent experience, have proven to be a more volatile asset.” But he didn’t put the kibosh on ICOs altogether, insisting, “It is possible to conduct an offer and sales of securities, including an ICO, without triggering the SEC’s registration requirements,” believing “an ICO that is a security can be structured so that it qualifies.”

𝑳𝒆𝒂𝒗𝒆 𝒊𝒕 𝒕𝒐 𝑺𝒕𝒂𝒕𝒆𝒔 𝒐𝒓 𝑭𝒆𝒅𝒔?
For those unfamiliar with the US concept of federalism, regulation can, and often is, left to the 50 states to work out under general federal guidelines. Some feel this approach is in line with historic governance of the country, while others appreciate 50 laboratories of different methodologies. It’s a version of subsidiarity, whereby the larger national government allows lawmakers closest to the ground their chance at solving whatever issue particular to regional concerns. On broadening federal law to blanket all crypto assets, the Chair hinted to being “open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate.” For Wall Street, this could be especially good news, considering their penchant for uniformity and expedience. It’s more difficult to say how bitcoiners will interpret the notion.

Furthermore, the Chair assumes “U.S.-based cryptocurrency trading platforms have elected to be regulated as money-transmission services,” his written remarks revealed, “these predominantly state-regulated payment services have not been subject to direct oversight by the SEC or the CFTC” as of the present hearing. That could be a signal for some kind of hole lawmakers at the federal level might feel the need to fill.

Significantly, the Chair has, especially in previous published comments, wondered aloud about which cryptos fall where on the regulatory scale, and bitcoiners have largely appreciated his awareness of the distinction. In a market where anything is called a cryptocurrency, even a project with only a PDF and no blockchain, the SEC head seems to understand they’re not all equal. There “are cryptocurrencies that, at least as currently designed, promoted and used, do not appear to be securities,” he clarified. Encouragingly, he briefly outlined how “determining what falls within the ambit of a securities offer and sale is a facts-and-circumstances analysis,” noting how “utilizing a principles-based framework…has served American companies and American investors well through periods of innovation and change for over 80 years.” Bitcoiners might be overjoyed to learn the SEC considers crypto possibly one of those “periods of innovation.”

Careful to not come off Panglossian, Mr. Clayton takes into account the very real concerns of lawmakers going forward. However, “These warnings are not an effort to undermine the fostering of innovation through our capital markets – America was built on the ingenuity, vision and spirit of entrepreneurs who tackled old and new problems in new, innovative ways,” he stressed.

The 71 page document has much more to say, and a great deal of it will be brought out through questioning by lawmakers, but, at least for now, bitcoiners can rest easier knowing no imminent Chinese crackdown is coming to the United States. These pages, of course, will have continued coverage of the hearing as it unfolds.

𝐖𝐡𝐚𝐭 𝐝𝐨 𝐲𝐨𝐮 𝐭𝐡𝐢𝐧𝐤 𝐨𝐟 𝐭𝐡𝐞 𝐒𝐄𝐂 𝐂𝐡𝐚𝐢𝐫’𝐬 𝐭𝐞𝐬𝐭𝐢𝐦𝐨𝐧𝐲? 𝐋𝐞𝐭 𝐮𝐬 𝐤𝐧𝐨𝐰 𝐢𝐧 𝐭𝐡𝐞 𝐜𝐨𝐦𝐦𝐞𝐧𝐭𝐬 𝐬𝐞𝐜𝐭𝐢𝐨𝐧 𝐛𝐞𝐥𝐨𝐰.