The chairman of the United States Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, recently discussed the challenges associated with assessing the regulatory implications of bitcoin and cryptocurrency according to the CFTC’s “decades[-]old” legislative mandate.
CFTC Chairman Criticizes 1930’s Legislative Apparatus
In a recent interview with CNBC, Mr. Giancarlo acknowledges the inappropriateness of the CFTC’s antiquated regulatory apparatus when assessing the innovative phenomena of bitcoin and cryptocurrencies.
When asked of the legal classification of bitcoin, Mr. Giancarlo stated: “It’s a great debate […] a lot of people are looking at it from so many different angles, and we at the CFTC have been looking at it for a number of years now.”
Mr. Giancarlo emphasized the challenge of applying the CFTC’s outdated regulatory apparatus to bitcoin, stating that “the statutes under which [the CFTC] operate[s] w[as] written, in our case, in 1935, and the SEC in 1933-34, and it’s often hard to look at those statutes, and find out where something as new and as innovative as bitcoin, and many of the other cryptocurrencies […] fall[s] into a regulatory regime that was written decades ago.”
CFTC Chairman Predicts Bitcoin’s Regulatory Challenges Won’t Be “Resolved Any Time Soon”
When queried regarding previous statements arguing that bitcoin exhibits similarities to commodities, Mr. Giancarlo stated, “I think there are certainly aspects of this that you might call a virtual asset, like gold – only its virtual […] It is an asset that many find worthy of holding for a long period of time,” adding that cryptocurrencies “have aspects […] that might not be ideal as a means of exchange, but might be suitable as a buy and hold strategy.”
The CFTC chairman added “But the truth of the matter of it is, is that bitcoin and a lot of its other virtual currency counterparts, really have elements of all of the different asset classes […] and so, as a world, and as regulators, we are coming to grips with this just now, in real-time,” concluding that “It’s complicated, and I don’t see it being resolved any time soon.”
Bitcoin Futures Regulations “Working Quite Well”
Mr. Giancarlo pointed to the bitcoin futures market as a successful example of cryptocurrency regulation, stating “In our case though, we have seen the licensing and the operation of bitcoin futures contracts, which are cash-settled contracts on bitcoin – operated by [The Chicago Mercantile Exchange (CME)] and [The Chicago Board Options Exchange (CBOE)] – and those contracts are working quite well.”
When asked of the potential risk of “over-zealous” regulation […] stifl[ing] innovation” in the cryptocurrency sector, Mr. Giancarlo stated that “As a regulatory agency, […] the [CFTC] has often been in the forefront of technological innovation, it’s in our DNA as an agency. We try to apply our statute on a principles-based approach – we look at the core principles and apply it to new innovations like this – and that’s the approach that we have taken in the case of bitcoin futures.”
Responsibility for Development of Legislation Lies With Congress
The CFTC chairman emphasized that the development of an effective regulatory apparatus for cryptocurrencies lies with the United States Congress, stating “At the end of the day, it’s for Congress, and not regulators, to decide whether new policies should be evolved for these new asset classes.”
“All […] regulators have to apply [their] statute in the spirit in which it was written […] by Congress,” added Mr. Giancarlo.
Mr. Giancarlo revealed that many politicians are coming to recognize the need for legislative reform regarding the development of cryptocurrency regulations, stating “I think there’s certainly an appetite, amongst a number of congressmen and women, and senators that I have spoken to, to approach this with some new eyes, some new thinking, and so I think there is a growing on Capitol Hill for some rethinking here.”
Growing Recognition of Need for Regulatory Reform
The CFTC chairman stated that “Jay Clayton from the SEC and I recently testified in front of the Senate banking committee, and we talked to Congress about whether maybe some new legislation might be appropriate in this area, and I think you will see, going forward, perhaps in this Congress or a future Congress, some attempt to deal with this new innovation.”
Despite the increasing recognition of the need for legislative reform, Mr. Giancarlo stressed that it will take time for a robust regulatory regime to be developed for bitcoin and other cryptocurrencies.
“I know bitcoin has been in place […] since eight or nine years or so, but the fact of the matter is [it] still is relatively new for us at the regulatory agency,” said Mr. Giancarlo, adding that it will “take some new open-mindedness, some new way of thinking about it, for us to get our heads around it entirely.”
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