Senate Cryptocurrency Hearing Strikes a Cautiously Optimistic Tone (techcrunch.com) 44
An anonymous reader quotes a report from TechCrunch: In a hearing today before the Senate Banking Committee, Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman Christopher Giancarlo opened up about what the near-term U.S. regulatory fate of cryptocurrency might look like. In a week of plunging prices and bad news, the hearing struck a tone that coin watchers could reasonably interpret as surprisingly optimistic. Over the course of the open hearing, Clayton and Giancarlo traded testimony over what can be regulated, what should be regulated and how, while offering a broader outlook on the long-term future of virtual currency markets and blockchain tech.
The testimony drew a useful distinction among three pillars of the virtual currency ecosystem (for lack of a better unifying term): cryptocurrencies, "a replacement for dollars;" ICOs, "like a stock offering;" and distributed ledger technologies, or the technical framework generally known as blockchain. Throughout the hearing, on the SEC side, Clayton struck a relatively solemn tone focused on ICO fraud concerns, while the CFTC's Giancarlo came across as genuinely enthusiastic and curious about the emerging market. When asked about the intrinsic value of cryptocurrency, Clayton said: "There are a lot of smart people who think there's something to the value of cryptocurrency and the international exchange and I'm not seeing those benefits manifesting themselves in the market yet. I look at this from the perspective of Main Street investors and they should understand that."
On ICOs as a security: "I believe every ICO I've seen is a security... You can call it a coin but if it functions as a security, it is a security... Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."
The testimony drew a useful distinction among three pillars of the virtual currency ecosystem (for lack of a better unifying term): cryptocurrencies, "a replacement for dollars;" ICOs, "like a stock offering;" and distributed ledger technologies, or the technical framework generally known as blockchain. Throughout the hearing, on the SEC side, Clayton struck a relatively solemn tone focused on ICO fraud concerns, while the CFTC's Giancarlo came across as genuinely enthusiastic and curious about the emerging market. When asked about the intrinsic value of cryptocurrency, Clayton said: "There are a lot of smart people who think there's something to the value of cryptocurrency and the international exchange and I'm not seeing those benefits manifesting themselves in the market yet. I look at this from the perspective of Main Street investors and they should understand that."
On ICOs as a security: "I believe every ICO I've seen is a security... You can call it a coin but if it functions as a security, it is a security... Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."
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Yep.
What part of "Initial Coin Offering" makes sense to anybody? (apart from the people offering the coins, naturally)
In what way isn't an ICO a scam? There's over 1500 cryptocurrencies now [coinmarketcap.com] (but only one that makes any sense [ponzicoin.co]).
Re: Itâ(TM)s all a scam (Score:1)
Most of the concept of stock and securities are a scam. You canâ(TM)t generally go to a company and demand they buy their stock back from you unless you own enough share of the company to force the issue. Itâ(TM)s not money or even a promissory note. Itâ(TM)s not even directly associated to the company in the sense that it doesnâ(TM)t actually reflect what the company is actually worth. If a company canâ(TM)t convince people that the stock is worth gambling on, its value can drop an
But it's not as clear cut... (Score:4, Insightful)
Re: But it's not as clear cut... (Score:1)
Except of course, that you most certainly can buy things with securities, its just that most people don't think about them that way. that's one of the huge values off the big board...making that easier, but it happens in the rral estate market all the time. A much more valid argument again crypto currencies being securities is that they don't have anything of real value behind them, unlike real securities.
My alternate currency [Re: But it's not as cle...] (Score:3)
Buy nuts. You'll be able to eat that shit after nuclear winter.
I put all my savings into bottles of "two buck chuck" wine from TJ's. You can use that as currency (for some things anyway), and as a bonus, it actually goes up in trading value after the nuclear apocalypse.
My basic calculation is, hey, at two dollars for a bottle, it can't go down, can it?
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A much more valid argument again crypto currencies being securities is that they don't have anything of real value behind them, unlike real securities.
Even that's not the case for some ICOs. They're effectively selling shares in a thing, along with embedded rules for how the total number of shares is allowed to grow, but without any of the regulations that they'd have to deal with if they did a conventional fund offering backed by the same thing.
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There is no reason you can't go somewhere and pay with stock, if you can find someone to accept it as payment. And stock is used as 'currency' quite often in corporate buyouts. And you can be paid by your employer in stock. Not seeing much difference.
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I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto.
Where can you buy coffee directly with cryptocoins? Not with some dollar-denominated debit card that is backed by an account containing cryptocoins... directly with cryptocoins? I don't think you actually can.
As others have said, though, there's absolutely no reason you couldn't do the same with stock. It's just not commonly done.
If you allow the coin-backed, dollar-denominated debit card in your definition of "paying with coins" then I not only can do that with stock, I do it regularly. I have a broker
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I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto.
Where can you buy coffee directly with cryptocoins?
Check for yourself: https://coinmap.org/welcome/ [coinmap.org]
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From TFA:
On ICOs as a security: "I believe every ICO I've seen is a security... You can call it a coin but if it functions as a security, it is a security... Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."
I don't think it's a security. I can't go somewhere and pay for my coffee by directly handing over 20 shares of BigCorp. I can go places and pay directly using crypto. I know what he's trying to do, but it should be explicitly recognised as a category in its own right rather than "let's pretend it's a classic security"
Exactly. By the metric he's using the US Dollar is a "security" as well. There's also a newer article on /. about a Goldman-Sachs guy saying to expect cryptocurrencies to hit zero value.
Sounds like the fix is in and government and their buddies on Wall St.want to kill cryptocurrencies without *looking* like they're just outright killing them. Mid-term elections are coming up.
Strat
Well, lots of scamminess going on here... (Score:2)
Sounds like the fix is in and government and their buddies on Wall St.want to kill cryptocurrencies
Well, to be honest, I think the real goal is for Wall St. and their cronies in government to get a piece of the action. Their problem is that they're not profiting enough off this set of scams.
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By definition, non-coin U.S. dollars are a security, as are all other paper bank notes. Coins (actual, physical coins) have some intrinsic value because the raw material has nontrivial value. This is why coins are treated differently by financial law. Bitcoins have no intrinsic value, and thus should be treated no differently than foreign currency, i.e. as securities.
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By definition, non-coin U.S. dollars are a security, as are all other paper bank notes. Coins (actual, physical coins) have some intrinsic value because the raw material has nontrivial value. This is why coins are treated differently by financial law. Bitcoins have no intrinsic value, and thus should be treated no differently than foreign currency, i.e. as securities.
True, but US fiat dollars are judged by a different standard than other securities, and for good reason. If they judged US fiat dollars by the same standards they judge other securities, they'd be investigating the Federal Reserve and people would be going to prison.
Strat
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True. Similarly, I'm pretty sure most countries allow you to exchange that country's coins for its paper bank notes without treating it as a currency exchange. :-D
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If I read the summary correctly, they are claiming that the ICOs are effectively IPOs, which makes a lot of sense. They are saying that BTC or Etherium are essentially money, but that the coins offered to raise capital are effectively securities. This is because they are right.
"Surprising"? (Score:1)
It's not surprising at all. They're just waiting to see if cryptocurrencies interfere with what they consider the natural flow of wealth, from the poor to the rich. If cryptocurrencies help the poor, and not the rich, they will fight it every way they can.
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So far, cryptocurrencies have only helped the wealthy get wealthier.
I doubt the wealthy made much on bitcoin so far. They certainly might in the future because the bitcoin market is really easy to manipulate (pump/dump).
Anybody who made money on Bitcoin so far did it through dumb luck.
Re: "Surprising"? (Score:1)
For rich it doesn't take a lot of effort to get richer.
What's in a name? (Score:5, Interesting)
Interesting. If it's a security there is already legislation in place to allow the government(s) to regulate it, and as many wise posters have posited, these blockchain coins are presently far too volatile to act as money in day-to-day transactions. Exchanges have historically charged exorbitant fees for buying and selling mined assets in an attempt to combat pricing volatility.
Of course, Bitcoins (and others) have found a niche in the world economy precisely because they are free of government control, banker manipulation, and any regulation. Since there's no shortage of mistrust of governments, everywhere, condemnation by governments could encourage the growth of these digital assets.
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Free? If the US bans credit card transactions and wire transfers with all exchanges cryptocurrencies are dead in the water.
Being free from government is an illusion, the best you can do is own part of it.
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American politicians seem more interested in regulating the digital currencies than banning them. Rendering citizen assets worthless is not unheard of, but requires more political courage than current lawmakers exhibit.
Also, the US is hardly the harbinger of world economics it once was. Don't dismiss out of hand the popularity of these coins as alternatives to conventional methods of storing wealth in Asian counties.
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The tracking of the past use of crypto wealth is also going to be so much fun when people have to show their new found "wealth", its origins and past global transactions.
No normal bank or CC will allow that inflow of new cash funds that draws gov/police questions.
People can hold and talk about cryptocurrency for a while. When a person finally wants to cash out their gov and bank will be waiting with unexpected questions.
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Of course, Bitcoins (and others) have found a niche in the world economy precisely because they are free of government control, banker manipulation, and any regulation.
But not in any freedom-fighting, swamp-draining, making-the-world-a-better-place way.
Bitcoin became famous because you could buy drugs with it.
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Apparently that's what people want to do and what the government keeps them from doing.
Why are you so for big government and against the free market? Are you a commie?
Translation (Score:2)
Now that it's about to fade into obscurity again, it's no longer a threat to our economy model.
We can still regulate it in case this dragon ever lifts its head again and endangers our flavor of fiat money.
Slippery slope (Score:2)