cryptocurrency, bitcoin, ethereum, crypto
In response to the Security and Exchange Commission’s (SEC) statement this week, the Chairman of the Commodity Futures Trading Commission (CFTC) released his own.
Background: the CFTC regulates most commodities, options, futures, derivatives and swaps. The CFTC has determined that cryptocurrencies are commodities, and thus are something the CFTC can regulate. And now that we're getting Bitcoin futures markets, crypto will fall under the CFTC's jurisdiction even more.
What Did The CFTC Say?
CFTC Chairman Giancarlo’s statement is short and sweet. He starts by commending the SEC for encouraging diligence by professionals and investors. And he ends with a warning that crypto is volatile and risky.
But in between, he says two pretty cool things.
One: A Bitcoin is a Bitcoin is a Bitcoin
The CFTC Chairman states:
I have said consistently that virtual currencies are unlike any commodity that the CFTC has deal with in the past.
As we’ve written before: A Bitcoin is a Bitcoin is a Bitcoin.
You can’t analogize cryptoassets; they require their own mental models. Even “currency” in “cryptocurrency” likely does the industry a disservice.
The recognitions from the SEC and CFTC that crypto is "unlike anything we've seen before" support the ideas that it’s not a bubble, because the agency has seen bubbles before (the dot com bubble, for example).
His comments also support the notion that previously used approaches to regulation may not work in the cryptoscape. This could be bad because agencies could clamp down with tighter regs…but also good be very good if they adopt lighter, more practical protocols.
Two: "Nascent Markets"
Chairman Giancarlo also says “market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority.” [Emphasis ours].
This isn’t as exciting as the prior statement, but we think the fact US regulatory agencies are openly using terms like “nascent market” instead of worse phrases like Ponzi scheme show they recognize it has legitimate value and is likely here to stay.
Unrelated thought of the day: someone should create a blockchain that the SEC could use. Like for its EDGAR database.