Yesterday in the U.S. Congress, the Committee on agriculture held a public hearing devoted to the cryptocurrency.
The hearings were broadcast live, but the beginning has been accompanied by some technical problems that caused the irritation of the audience and even a few comments stating that people who cannot provide the proper quality of the broadcast is unlikely to have to solve the problem of regulating the high-tech region.
All the speakers were unanimous in their opinion that digital assets is an extremely complicated phenomenon existing regulatory framework.
The hearing was chaired by representative of the state of Texas Michael Conaway, which heard six witnesses, among whom were: former partner of Goldman Sachs and the government US regulators Gary Gensler, managing partner at Andreessen Horowitz Scott Kupor, David Garvin of the CFTC, Professor of law Joshua Fairfield, CEO Clovyr amber of Blade and managing partner of Perkins Coie Lowell ness.
The main conclusion of this hearing is that digital assets can quickly change the regulatory jurisdiction to which they are subject because they are able to move from one context to another.
As Gensler and Fairfield argued that, when the digital tokens are sold at “prefunctional” the point of its development, that is, during the ICO, then the transaction should be regarded as an investment contract and, thus, the token and transactions with them shall be governed by the Commission on securities and exchange Commission (SEC).
However, tokens can easily cease to be securities as soon as they will be used in a decentralized network as a utility-token (token utility), for example, in the case of Ethereum (ETH). This means that the digital asset may at some point be security or an analogue thereof and thus fall under the jurisdiction of the SEC, and later to become a product subject to the jurisdiction of the Commission on trade commodity futures (CFTC).
According to Gorfine, the CFTC generally does not directly supervise the major markets of commodities, but rather regulates derivatives, such as futures and swaps.
Gensler has evaluated the “current state of crypto-currency markets” as the “wild West” and that the CFTC potentially in need of greater authority and resources to solve this problem. According to him, the SEC may require 2-4 years to solve “thousands” of “unfair” participants in the field of ICO.
Ness expressed concern that excessive extension of the classification of securities may seriously interfere with the development of cryptocurrency industry, whose aim is the creation of networks and other tools that would “convey value (valuable assets) with data transfer rate”.
The SEC, in particular, requires that the beneficial ownership of the asset can be determined at any moment in time, according to Gensler, technologically impossible, at least for the moment.
In response to concerns of members of the Committee that the cryptocurrency can be used to Finance illegal activities, Kupor said that “bitcoin is the best friend of law enforcement”, given that all transactions on the blockchain can be tracked.
Ness, referring to the recent case of 12 Russian citizens who are accused of meddling in the presidential election in 2016 in the United States, said that “the alleged Russian hackers have been caught because they used bitcoin”.