A transcript from a Securities and Exchange Commission (SEC) roundtable in June highlighted an example of the passionate discussions around cryptocurrencies within the agency. Eric Werner, associate director of enforcement for the SEC’s Fort Worth regional office, introduced Jay Clayton, SEC Chairman, with a story about the first time he met the chairman, who was engaged in a “heated discussion about the legitimacy and viability of cryptocurrencies” with an attorney.
“I was taken aback, honestly, about how much thought he had given to this space and the issues surrounding that,” said Werner. “What I have learned in the time working with him is that he has given every single issue that he has confronted that same dedication and thought process."
Clayton’s commitment to discussing cutting-edge topics like cryptocurrency is a positive sign to enthusiasts as lawmakers grapple with how to approach the technology. Regulation has been a key talking point since 2017’s boom prompted governments around the world to address the issue, and consensus has been hard to come by.
The SEC is one of several US regulatory bodies looking at the industry. At a February hearing, Clayton offered testimony on what can and should be regulated, as well as the logistics of doing so, and presented their thoughts on the future of blockchain and cryptocurrency markets. They focused on three main pillars of the cryptocurrency ecosystem – cryptocurrencies as “a replacement for dollars;” ICOs (Initial Coin Offerings) functioning “like a stock offering;” and distributed ledger technologies, or blockchain. Clayton struck a solemn tone at the time as he detailed his concerns about ICO fraud and protecting ‘Main Street’ investors.
ICOs have drawn the most scrutiny from the SEC – Clayton rarely hesitates to express his belief that every ICO he has seen qualifies as a security. But he has also made clear that there is a delineation between ICOs and cryptocurrencies, and that they should be treated as separate entities. “I want to go back to separating ICOs and cryptocurrencies,” said Clayton in the February hearing. “ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”
It remains to be seen how future regulations shake out. The lack of a concrete framework can cause difficulties for companies plotting a course of action. Recent reports detailing the SEC’s greenlighting of prominent exchange Coinbase’s purchase of three security dealers – a precursor to offering securities tokens on the service – were revised after Coinbase clarified they had “discussed aspects of proposed operations…on an informal basis with several members of SEC staff.” A representative for the SEC also confirmed that the agency did not give Coinbase explicit approval for the deal. While it is clear that regulations will be coming, reports of cryptocurrency’s demise at the hands of regulators appear to have been greatly exaggerated.