The past two weeks have been mundane at best-regarding market value for cryptocurrencies. In what might have been just another similar week, things are looking up after an unexpected development.
While the update that came was not about a long overdue market spike, it was certainly good news from various perspectives as it backed cryptocurrencies when most people were not expecting it to do so.
What is this all about?
Christopher Giancarlo, Chairman of the U.S. Commodity Futures Trading Commission (CFTC), had appeared in front of the Senate Committee on Banking, Housing and Urban Affairs to record his statement about cryptocurrencies and related aspects. The coverage of the event was released earlier this week.
To the surprise of many, the statement comprised of some very positive things about Bitcoin and other cryptocurrencies.
As mentioned above, while the statements were recorded in January, the coverage was released to the press only this week. Therefore, this news – even if it is reported a month later than the event – could have very positive effects on cryptocurrencies in the next few days because the Chairman of CFTC referring to Bitcoin and cryptocurrencies positively is not something that can be taken lightly.
A realistic approach
When asked about the classification of Bitcoin, Giancarlo was realistic and more accurate than most revered financial personalities have gone on record to be so far.
“What’s so challenging about Bitcoin is it has characteristics of multiple different things. One of the phrases that’s often used is that Bitcoin is a medium of exchange, a store of value, or a means of accounts. Well, those three things have different connotations to them.”
He mentioned how Bitcoin’s use as a “medium of exchange” or “means of accounts” that would have classified it as a digital currency now gets to be different in its everyday usage.
Giancarlo referred to a Bitcoin conference that stopped accepting payments in Bitcoin because they could not be processed, and mentioned that incidents such as that one contribute towards why Bitcoin can be considered more like a “store of value,” which would then make it “like an asset or a commodity.”
He then mentioned “HODL” and explained it in detail as “hold on for dear life” before sharing an anecdote.
Talking about his niece, Giancarlo mentioned that she purchased Bitcoin before its recent surge, and she now states that “I’m gonna own it, I don’t know what’s gonna come of it, but I wanna hang on to it.”
He hinted that this incident has made him believe that individuals who hold on to Bitcoin are everyday people, and not all who have purchased Bitcoin are involved in fraudulent activities.
“She’s not a fraudster or manipulator, she’s just a kid. And believes in it [Bitcoin]. And I was fascinated talking to her. And I think she represents a lot of folks that think ‘there’s something in this and I want to hold on to it.’ In that regard, from our point of view, it’s a commodity. And if there’s a derivative on that, we regulate it.”
Giancarlo then mentioned the restrictions that the CFTC has over cash and spot markets and how it cannot have a say in regulations for these settings (such as major exchanges). He mentioned that the CFTC would continue working in all capacities that it could to ensure that the market stays free of fraudulent entities and everyday investors can remain safe.
“The problem is, in the cash market, we do not have regulatory authority [which] means we can’t set the standards, but what we will do and we are doing is looking for fraud and manipulation, and we intend to be very aggressive, if nothing else so that people like my niece can have some security that there’s not fraudsters and manipulators out there, and there are far too many of them.”
The statement did not only contain that positive view of cryptocurrency investors
Speaking about how Bitcoin and other cryptocurrencies have brought blockchain and its distributed ledger technology (DLT) to the mainstream, Giancarlo mentioned that people need to think of one thing.
“It’s important to remember that if there was no Bitcoin, there would be no blockchain.”
Which holds true, because it was Bitcoin that had introduced the technology in its current capacity.
He also encouraged the development of DLT and mentioned that it should be treated with the same approach as another technological revolution that changed the world decades ago.
“’Do no harm’ was unquestionably the right approach to the development of the Internet. Similarly, I believe that do no harm is the right overarching approach for distributed ledger technology.”
Considering his observations on Bitcoin, cryptocurrencies, and relevant avenues, Giancarlo went on to state one of the most important takeaways from the statement.
“We owe it to this new generation to respect their interest in this new technology with a thoughtful regulatory approach.” He suggested.
The chairman of another regulatory authority went on record as well
Jay Clayton, Chairman of the Securities and Exchange Commission (SEC), also provided his statement on how cryptocurrencies are changing the investment market and what needs to be done about the risks that they pose.
He mentioned that due to their overall structure, initial coin offerings (ICOs) need to be regarded as securities by federal regulations.
Speaking of additional investment products involving cryptocurrencies, Clayton stated that cryptocurrency based exchange-traded funds (ETFs) could not be vetted through the same rules as conventional ETFs considering that they deal with a more volatile asset class and will primarily cater to retail investors.
The SEC had previously outlined a few questions to discuss its reservations with cryptocurrency ETFs and had stated that such ETFs could be considered once sufficient answers are available for those questions.