A Congressional hearing held today conducted an overview of the cryptocurrency and ICO markets. It looked at rapid recent growth, the potential opportunities for raising capital that cryptocurrencies and ICOs could offer to businesses and investors, and how investors could be protected by ensuring adherence to applicable laws.
It also considered a regulatory approach, looking at the current stance of the Securities and Exchange Commission and how it might move forward.
There were four witnesses in attendance, each with a wealth of legal expertise: Mike Lempres, chief legal and risk officer at Coinbase; Chris Brummer, professor of law at Georgetown University; Peter Van Valkenburgh, from advocacy group Coin Center; and Robert Rosenblum, a partner at Wilson Sonsini Goodrich and Rosati, a firm that specializes in business, securities, and intellectual property law.
The main question explored was if a new scheme to regulate cryptocurrency is really necessary, and if cryptocurrencies can be properly regulated under existing laws. This prompted discussion over how exactly cryptocurrencies can be categorised, and if the definitions of existing financial instruments can be made applicable.
The potential downside of regulation was also explored, with Coinbase chief legal officer Mike Lempres suggesting that the SEC need to work with the CFTC in order to reach consensus on a clear definition of what cryptocurrency is, before regulation can be established. This would avoid legal missteps that could unintentionally damage or limit the advantages of cryptocurrency, and is necessary in order to create an environment that gives clear direction to startups wanting to operate in the space. Lempres suggested this lack of clarity on regulation had also contributed to Coinbase’s unwillingness to list new tokens.
Some of the strongest criticism came from California Representative Brad Sherman, who questioned the social benefit:
According to OpenSecrets, Brad Sherman raised $61,700 from the securities and investment industries in 2017-2018, while credit unions opted to offer him another $22,000. Money from the real estate, accounting, and insurance industries rounded out his top five donation sources by industry. In 2016, Sherman was funded by $133,525 from the investment and securities industry.
Mr. Sherman is up for re-election in 2018.
Despite this outlandish attack, there was a general tone of encouragement and unwillingness to stifle development in the space. Mr. Emmer, the Minnesota Representative, was particularly profuse in his support.
He expressing the need for elected officials to educate themselves on cryptocurrency, and that rushing in with a “wet blanket” of regulation could be stifling to development. He supported this by citing the wide applications of blockchain technology, mentioning specifically using blockchain to provide banking to the unbanked, which he stated is something that “congress should be celebrating” rather than “introducing a new policeman to invade the space and frustrate the development”.
The hearing was on the whole balanced, with members voicing equal amounts of both support and criticism. Emphasis was placed on the crucial need for education and understanding, before a route forward is chosen.