The chairman of the U.S. Commodity Futures Trading Commission (CFTC) has spoken of the need for balance and a "do no harm" approach when regulating cryptocurrencies.
In a written testimony presented to the Senate Banking Committee today, J. Christopher Giancarlo said that in this "new digital era" for the financial markets, cryptocurrencies have brought "paradigm shift" in how the world views payments and financial processes, and that ignoring such innovation "will not make them go away, nor is it a responsible regulatory response."
Giancarlo continued:
"'Do no harm' was unquestionably the right approach to development of the Internet. Similarly, I believe that 'do no harm' is the right overarching approach for distributed ledger technology. ... With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity."
That's not to say the CFTC will sit back and do nothing, however. The commission chair spelled out how his agency has previously taken civil enforcement actions against several "virtual currency Ponzi schemes," including My Big Coin Pay Inc, The Entrepreneurs Headquarters Limited and Coin Drop Markets.
These actions confirm, he said, that the CFTC, in conjunction with the SEC and other financial enforcement agencies, will protect investors and "aggressively prosecute" cryptocurrency schemes that engage in fraud and manipulation.
Giancarlo further addressed the recent arrival of self-certified bitcoin futures products, which have seen some criticism from the traditional futures sector.
He argued that it is the role of the futures exchanges and futures clearinghouses, themselves, and not the CFTC, to address concerns over new product self-certifications.
However, the chairman said that the commission has added an additional element to the Review and Compliance Checklist for cryptocurrency futures products.
Giancarlo explained this entails requesting product providers to disclose to the CFTC the steps they have taken "to gather and accommodate appropriate input from concerned parties, including trading firms and FCMs."
Additionally, the CFTC will take a "close look" at governance around such products and develop recommendations for possible further action, he added.