Cryptocurrencies
ICOs in the USA

SEC & CFTC Assure They Will Drop the Gavel of Justice on ICO’s target = _blank >
and

Burgess COMMENTARY

Peter Burgess

SEC & CFTC Assure They Will Drop the Gavel of Justice on ICO’s

February 6, 2018

Dirksen Senate Building, Washington D.C. – In the Senate Committee on Banking, Housing, & Urban Affairs, Christopher Giancarlo Chairman of the CFTC (U.S. Commodity Futures Trading Commission) and Jay Clayton Chairman of the SEC (U.S. Securities and Exchanges Commission) are the sole witnesses at the Senate hearing on 'Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission'.

The dimmed lights and silk-suited advisors to both of the chairmen set the tone for a decisive moment for cryptocurrencies. A silent yet eager crowd sit behind the witnesses. “The committee is in order” says the Committee Chairman. In front of him sit two of the arguably most influential men who will determine how Americans will participate in the crypto-markets for the next ten years. As the senator spoke almost everyone in the audience could agree that wording be the key tool that would define the true actions of these agencies in the coming months. So it was, wording along with the Senate Chairman Michael Crapo were the allies of SEC Chairman Jay Clayton; who managed to sneak by crowd a few not-so-subtle hints that major changes were coming to the Crypto-Market in terms of both of the roles the agencies play.

To be clear, there are two key points that must be understood by everyone from the events that took place in the hearing. The first would perhaps be the most detrimental: Both Giancarlo & Clayton agree that they will bring the hammer of justice to illegal ICO’s in the Crypto-Market. The second can vary on meaning depending on your personal views: Both the SEC & CFTC will return with other agencies to the Senate in an effort to augment their jurisdiction over the Crypto-Markets and establish their developing regulation.

Although obviously ill defined, Mr. Clayton managed to successfully peg the term “Stock Offering” to “ICO” or Initial Coin Offering. This has legal repercussions that are bound to be felt in the coming months. According to Clayton, he has “not seen a single ICO that did not fit the description of a securities offering”. On a separate occasion within the same hearing, Mr. Clayton affirmed that not a single ICO had registered as a Securities Offering with the SEC. With the information provided by the Chairman of the SEC, we can conclude that according to SEC chairman Clayton all ICO’s are illegal.

However, the investors that have been in the crypto-markets long enough understand that there is a definitive difference in definition between the terms: Cryptocurrency, Tokenized Security, and Utility Token; a differentiation that Mr. Clayton failed to make. Was it a mistake or did he purposely generalize the term? Unfortunately for us, there is no way to tell. However, putting aside the definition the SEC wants to impose in the American public, one truth still stands: Not all tokenized securities ICO nor are all ICO’s tokenized securities.

Assuming that both the Chairman of the CFTC and the Chairman of the SEC keep their word of cracking down on every entity that did an ICO, what repercussions do you think that would have on the Crypto-Market short-term & long-term?

It is also important to note that both Giancarlo and Clayton declared that any “virtual currencies” that were stolen or lost are not under the protection of either the SEC nor the CFTC. That said, there is nothing either agency can do.

There were other events worth noting that occurred in the hearing:

· Both Chairmen assured that they do not have regulatory jurisdiction over domestic & foreign exchanges. So yes, how crypto-exchanges decide what tokens will be admitted will be out of the hands of the Federal government.

· As the international nature of the Crypto-Market continues to grow, Mr. Clayton affirms that FinCEN does not have jurisdiction with the current regulatory powers vest in it. However, other countries seem to be in talks of an international entity that regulates these “virtual currencies”.

· Neither the CFTC nor the SEC has the authority to regulate foreign governments from using Distributed-Ledger-Tokens to avoid US sanctions.

· Both the CFTC & the SEC assure that they DO have the regulatory jurisdiction over market manipulators AKA Pump & Dump Groups. That said, we could be seeing an end to large P&D groups such as Whalepool.

Both agencies had a genuine interest in providing educational material for those interested in participating in the Crypto-Markets. Mr. Giancarlo, Chairman of the CFTC referenced collaboration between them and the CFPB regarding them providing educational material for consumers and investors alike.

You can find educational resources provided by the different agencies below:

Consumer Financial Protection Bureau: CFPB Warns Consumers About Bitcoin

U.S. Commodity Futures Trading Commission: Bitcoin Index

U.S. Securities & Exchange Commission: Spotlight on Initial Coin Offerings and Digital Assets

The links to both testimonies by the witnesses can be found below:

Chairman of the U.S. Securities and Exchange Commission The Honorable Jay Clayton

Chairman of the U.S. Commodity Futures Trading Commission The Honorable J. Christopher Giancarlo

Authored by: José E. González Media Contact: info@blockchainpuertorico.org