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Senate Cryptocurrency Hearing Strikes a Cautiously Optimistic Tone (techcrunch.com)

Posted by BeauHD on from the coordinated-efforts dept.

An anonymous reader quotes a report from TechCrunch: 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 can be 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. When asked about the intrinsic value of cryptocurrency, Clayton said: "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."

On ICOs as a security: "I believe every ICO I've seen is a security... You can call it a coin but if it functions as a security, it is a security... Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."

44 comments

  1. Itâ(TM)s all a scam by Anonymous Coward · · Score: 0

    seriously, run from that shit

    1. Re:Itâ(TM)s all a scam by Joce640k · · Score: 2

      Yep.

      What part of "Initial Coin Offering" makes sense to anybody? (apart from the people offering the coins, naturally)

      In what way isn't an ICO a scam? There's over 1500 cryptocurrencies now (but only one that makes any sense).

      --
      No sig today...
    2. Re: Itâ(TM)s all a scam by Anonymous Coward · · Score: 1

      Most of the concept of stock and securities are a scam. You canâ(TM)t generally go to a company and demand they buy their stock back from you unless you own enough share of the company to force the issue. Itâ(TM)s not money or even a promissory note. Itâ(TM)s not even directly associated to the company in the sense that it doesnâ(TM)t actually reflect what the company is actually worth. If a company canâ(TM)t convince people that the stock is worth gambling on, its value can drop and the stock can be delisted leaving the owner of the share with no means of ever getting even that little money back.

      Most stock trading as it stands today is speculative based on whether you believe other people will be willing to pay more for a share than you paid or whether you can sell a share and then buy one back for less than you sold it for.

      People donâ(TM)t really trade parts of a company. They simply gamble on a unit of nothing in particular.

      Investing in a company means that you give money to a company hoping either to achieve a return based on the profits of the company or by investing helping to improve society in a way you will feel in return.

      KickStarter is generally investing. The stock market... not so much. Itâ(TM)s just a scam.

    3. Re:Itâ(TM)s all a scam by Anonymous Coward · · Score: 0

      I bought about 100,000 ether during the ethereum ICO. It worked out well for me.

  2. But it's not as clear cut... by mccalli · · Score: 3, Insightful

    I don't think it's a security. I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto. I know what he's trying to do, but it should be explicitly recognised as a category in its own right rather than "let's pretend it's a classic security".

    1. Re: But it's not as clear cut... by Anonymous Coward · · Score: 1

      Except of course, that you most certainly can buy things with securities, its just that most people don't think about them that way. that's one of the huge values off the big board...making that easier, but it happens in the rral estate market all the time. A much more valid argument again crypto currencies being securities is that they don't have anything of real value behind them, unlike real securities.

    2. Re: But it's not as clear cut... by Anonymous Coward · · Score: 0

      Buy nuts. You'll be able to eat that shit after nuclear winter.

    3. Re:But it's not as clear cut... by bws111 · · Score: 1

      There is no reason you can't go somewhere and pay with stock, if you can find someone to accept it as payment. And stock is used as 'currency' quite often in corporate buyouts. And you can be paid by your employer in stock. Not seeing much difference.

    4. Re: But it's not as clear cut... by TheRaven64 · · Score: 1

      A much more valid argument again crypto currencies being securities is that they don't have anything of real value behind them, unlike real securities.

      Even that's not the case for some ICOs. They're effectively selling shares in a thing, along with embedded rules for how the total number of shares is allowed to grow, but without any of the regulations that they'd have to deal with if they did a conventional fund offering backed by the same thing.

      --
      I am TheRaven on Soylent News
    5. Re:But it's not as clear cut... by swillden · · Score: 1

      I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto.

      Where can you buy coffee directly with cryptocoins? Not with some dollar-denominated debit card that is backed by an account containing cryptocoins... directly with cryptocoins? I don't think you actually can.

      As others have said, though, there's absolutely no reason you couldn't do the same with stock. It's just not commonly done.

      If you allow the coin-backed, dollar-denominated debit card in your definition of "paying with coins" then I not only can do that with stock, I do it regularly. I have a brokerage account that gives me a debit card and draws on my margin account, which is backed by the stocks and mutual funds I own. My account is more transparent about what's going on that the cryptocoin-backed equivalent, in that it's clear that what I'm actually doing is borrowing money against assets while the other tries to make it appear that the cryptocoins are being spent directly, but that doesn't change the fundamental equivalency.

      That said, I also don't believe cryptocoins are securities. To be securities, there has to be ownership of something of some intrinsic value, even if it's abstracted several layers. Cryptocoins that are actually useable as currencies (not BTC) are currencies. The best analogy for BTC at this point is "Ponzi scheme".

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    6. Re:But it's not as clear cut... by BlueStrat · · Score: 2

      From TFA:

      On ICOs as a security: "I believe every ICO I've seen is a security... You can call it a coin but if it functions as a security, it is a security... Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."

      I don't think it's a security. I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto. I know what he's trying to do, but it should be explicitly recognised as a category in its own right rather than "let's pretend it's a classic security"

      Exactly. By the metric he's using the US Dollar is a "security" as well. There's also a newer article on /. about a Goldman-Sachs guy saying to expect cryptocurrencies to hit zero value.

      Sounds like the fix is in and government and their buddies on Wall St.want to kill cryptocurrencies without *looking* like they're just outright killing them. Mid-term elections are coming up.

      Strat

      --
      Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
    7. Re:But it's not as clear cut... by war4peace · · Score: 1

      I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto.

      Where can you buy coffee directly with cryptocoins?

      Check for yourself: https://coinmap.org/welcome/

      --
      ...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
    8. Re:But it's not as clear cut... by Anonymous Coward · · Score: 1

      If I read the summary correctly, they are claiming that the ICOs are effectively IPOs, which makes a lot of sense. They are saying that BTC or Etherium are essentially money, but that the coins offered to raise capital are effectively securities. This is because they are right.

    9. Re:But it's not as clear cut... by dgatwood · · Score: 1

      Exactly. By the metric he's using the US Dollar is a "security" as well.

      By definition, non-coin U.S. dollars are a security, as are all other paper bank notes. Coins (actual, physical coins) have some intrinsic value because the raw material has nontrivial value. This is why coins are treated differently by financial law. Bitcoins have no intrinsic value, and thus should be treated no differently than foreign currency, i.e. as securities.

      --

      Check out my sci-fi/humor trilogy at PatriotsBooks.

    10. Re:But it's not as clear cut... by BlueStrat · · Score: 1

      By definition, non-coin U.S. dollars are a security, as are all other paper bank notes. Coins (actual, physical coins) have some intrinsic value because the raw material has nontrivial value. This is why coins are treated differently by financial law. Bitcoins have no intrinsic value, and thus should be treated no differently than foreign currency, i.e. as securities.

      True, but US fiat dollars are judged by a different standard than other securities, and for good reason. If they judged US fiat dollars by the same standards they judge other securities, they'd be investigating the Federal Reserve and people would be going to prison.

      Strat

      --
      Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
    11. Re:But it's not as clear cut... by dgatwood · · Score: 1

      True. Similarly, I'm pretty sure most countries allow you to exchange that country's coins for its paper bank notes without treating it as a currency exchange. :-D

      --

      Check out my sci-fi/humor trilogy at PatriotsBooks.

  3. "Surprising"? by Anonymous Coward · · Score: 1

    It's not surprising at all. They're just waiting to see if cryptocurrencies interfere with what they consider the natural flow of wealth, from the poor to the rich. If cryptocurrencies help the poor, and not the rich, they will fight it every way they can.

    1. Re:"Surprising"? by Anonymous Coward · · Score: 0

      So far, cryptocurrencies have only helped the wealthy get wealthier.

      Don't get me wrong. It's not be design. It's because poor people generally do not have a leadership mindset and do not take initiative to buy and sell at the right times. Instead, they wait until the market is at a peak to start buying, because that's when they feel confident it will continue to rise. Then, they panic sell after the price falls, losing most of their usually small investment in the process.

    2. Re:"Surprising"? by Joce640k · · Score: 1

      So far, cryptocurrencies have only helped the wealthy get wealthier.

      I doubt the wealthy made much on bitcoin so far. They certainly might in the future because the bitcoin market is really easy to manipulate (pump/dump).

      Anybody who made money on Bitcoin so far did it through dumb luck.

      --
      No sig today...
    3. Re: "Surprising"? by Anonymous Coward · · Score: 1

      For rich it doesn't take a lot of effort to get richer.

    4. Re:"Surprising"? by Anonymous Coward · · Score: 0

      Umm... Is it not because, you know, poor people do not have enough money to invest at all?

      Even if you want to start at the base and start mining currency, you have to invest in hardware that's currently (ironically because of mining) completely out of range for even someone with a modest income. (about $1500 for one GPU card, and you need lots more to make even a small dent).

      Nahh.. It's because those poor people lack initiative... Right?

  4. What's in a name? by rmdingler · · Score: 4, Interesting

    Interesting. If it's a security there is already legislation in place to allow the government(s) to regulate it, and as many wise posters have posited, these blockchain coins are presently far too volatile to act as money in day-to-day transactions. Exchanges have historically charged exorbitant fees for buying and selling mined assets in an attempt to combat pricing volatility.

    Of course, Bitcoins (and others) have found a niche in the world economy precisely because they are free of government control, banker manipulation, and any regulation. Since there's no shortage of mistrust of governments, everywhere, condemnation by governments could encourage the growth of these digital assets.

    --
    Happiness in intelligent people is the rarest thing I know.

    Ernest Hemingway

    1. Re:What's in a name? by Pinky's+Brain · · Score: 1, Insightful

      Free? If the US bans credit card transactions and wire transfers with all exchanges cryptocurrencies are dead in the water.

      Being free from government is an illusion, the best you can do is own part of it.

    2. Re:What's in a name? by Joce640k · · Score: 1

      Of course, Bitcoins (and others) have found a niche in the world economy precisely because they are free of government control, banker manipulation, and any regulation.

      But not in any freedom-fighting, swamp-draining, making-the-world-a-better-place way.

      Bitcoin became famous because you could buy drugs with it.

      --
      No sig today...
    3. Re:What's in a name? by Opportunist · · Score: 1

      Apparently that's what people want to do and what the government keeps them from doing.

      Why are you so for big government and against the free market? Are you a commie?

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    4. Re:What's in a name? by rmdingler · · Score: 1

      American politicians seem more interested in regulating the digital currencies than banning them. Rendering citizen assets worthless is not unheard of, but requires more political courage than current lawmakers exhibit.

      Also, the US is hardly the harbinger of world economics it once was. Don't dismiss out of hand the popularity of these coins as alternatives to conventional methods of storing wealth in Asian counties.

      --
      Happiness in intelligent people is the rarest thing I know.

      Ernest Hemingway

    5. Re:What's in a name? by AHuxley · · Score: 0

      Re 'If the US bans credit card transactions and wire transfers with all exchanges"
      The tracking of the past use of crypto wealth is also going to be so much fun when people have to show their new found "wealth", its origins and past global transactions.
      No normal bank or CC will allow that inflow of new cash funds that draws gov/police questions.
      People can hold and talk about cryptocurrency for a while. When a person finally wants to cash out their gov and bank will be waiting with unexpected questions.
      Gov and banks will accept cash from work, a gift, inheritance, stock market, property, payment for a book, invention, past creativity. Normal things that make wealth and that can be tracked.
      Was that part of "cryptocurrency" seen by law enforcement at any time? Now its been turned to cash? At a bank? Who is trying to convert it? How much? Foreign bank account crypto "assets"?
      Currency transaction reporting, suspicious activity reporting, monetary instrument tracking (monetary instrument logs). A fun chatdown at the bank as they are aware of any attempts to stay below a reporting threshold.

      --
      Domestic spying is now "Benign Information Gathering"
    6. Re:What's in a name? by Gilgaron · · Score: 1

      Aren't the governments in Asia turning on them first?

    7. Re:What's in a name? by Anonymous Coward · · Score: 0

      Apparently that's what people want to do and what the government keeps them from doing.

      A.K.A. "The Empire Strikes Back."

    8. Re:What's in a name? by Anonymous Coward · · Score: 0

      This is why you cash out for cash... Go to the silk road, and buy an envelope full of hundred dollar bills with your bitcoins.

  5. Translation by Opportunist · · Score: 1

    Now that it's about to fade into obscurity again, it's no longer a threat to our economy model.

    We can still regulate it in case this dragon ever lifts its head again and endangers our flavor of fiat money.

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
  6. It's a security because. . . by Anonymous Coward · · Score: 0

    It is. Once again, millennials haven't *invented* jack shit, just stumbled across an idea that already existed, and has already been addressed. This wouldn't happen if your parents hadn't raised you to think everyone lived in the dark ages before your blessed arrivals. Live and learn, kids. And grow the eff up, already.

  7. My alternate currency [Re: But it's not as cle...] by Geoffrey.landis · · Score: 2

    Buy nuts. You'll be able to eat that shit after nuclear winter.

    I put all my savings into bottles of "two buck chuck" wine from TJ's. You can use that as currency (for some things anyway), and as a bonus, it actually goes up in trading value after the nuclear apocalypse.

    My basic calculation is, hey, at two dollars for a bottle, it can't go down, can it?

    --
    http://www.geoffreylandis.com
  8. No Crypto by Anonymous Coward · · Score: 0

    Attention all governments and government agencies, all banks, all corporations, all individuals.

    We are not fooled by what is really going on. The New World Order wants to implement a one world currency all under control of a few groups of people. This will not be tolerated.

    A centralized crypto currency is far too much power that will be completely unchecked by the people.

    Thousands of people have already said they will fight militarily to prevent it. I heard somebody just yesterday say: "There will be a military attack on any corporation's board members that even attempt to require a crypto currency or any government entity that attempts to require it's use."

    I don't personally condone violence, but I would say it's likely, and I won't have any sympathy because the crypto currencies are far too powerful.

    1. Re:No Crypto by Anonymous Coward · · Score: 0

      that's why you have to back a privacy respecting project like Monero. crypto currency is like a tsunami. it is coming. the only question is whether you will drown or surf it.

  9. Well, lots of scamminess going on here... by rsborg · · Score: 1

    Sounds like the fix is in and government and their buddies on Wall St.want to kill cryptocurrencies

    Well, to be honest, I think the real goal is for Wall St. and their cronies in government to get a piece of the action. Their problem is that they're not profiting enough off this set of scams.

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  10. Slippery slope by rcharbon · · Score: 1

    Start regulating cryptocurrencies, and soon you'll have to regulate other shady trading schemes, like the stock exchange.

  11. All cryptocurrencies need to be banned globally! by Anonymous Coward · · Score: 0

    If they are really currency, why no company/store can use Bitcoin as currency anymore?
    Because the price of Bitcoin proved to be extremely unstable to use as a currency?
    Would the result be different, if Bitcoin replaced by any other "cryptocurrency"?

    Or, they are not actually virtual currency but virtual investment?
    But if they are actually investment, why we need/want them?
    What would happen to world economy, if people invested in virtual investments, instead of real investments?

    Or, all so-called cryptocurrencies are actually just a modified (made decentralized and paying variable interest) Ponzi Schemes?

  12. Re:It's all a scam by Anonymous Coward · · Score: 0

    $80M, not bad. Still HODLing?