During a Congressional Hearing on Wednesday, July 18, Daniel Gorfine, director of LabCFTC – the fintech initiative of the Commodity Futures Trading Commission (CFTC) warned the members of the U.S. House Committee on Agriculture against “hasty regulatory pronouncements” on the issue of digital assets and cryptocurrencies.
During his address Gorfine said that there are multiple assets which can be classified as “commodities” but not necessarily each of them requires attention from the U.S regulators. He said:
“It’s only when we start to see the rise of futures or swaps products built on those commodities that we have kind of direct oversight.”
In his remarks, Gofine further added:
“We all have the shared goal to bring clarity and certainty to the market but [we] also need to be sure that we are thoughtful in our approach and do not steer or impede the development of this area of innovation. Indeed, while some may seek the immediate establishment of bright lines, the reality is that hasty regulatory pronouncements are likely to miss the mark, have unintended consequences, or fail to capture important nuance regarding the structure of new products or models.”
Gorfine reiterated his central point several times while opining that the authorities should not be in “figuring out what the contours are of applying securities law and then the commodities framework.” Gorfine also expressed some common concerns regarding the existence of bad players in the crypto market and the fact that more than 80% ICOs have gone bankrupt till now.
Gorfine said that he and his team at the LabCFTC are very much focused on the “fintech primer” that ultimately aims towards educating investors and regulators about the technology to avoid scams. He believes that the lack of education is the primary source of fraud.
On the counter view, Gary Gensler, Senior Lecturer at the MIT Sloan School of Management, argues that quicker and transparent regulations are much required to keep the pace of innovation taking place in the United States. Gensler said that unclear and strict rules would drive innovation out of the country, which could be concerning. He also noted that once the innovators move out of the country, it would be difficult to bring them back even while creating healthy regulations.
Rep. Collin Peterson took a hard-hitting note during his address saying that the cryptocurrency ecosystem “seems like a Ponzi scheme” and asking “what’s behind this?” However, Gensler was quick to respond to Collins view saying that “there’s really nothing behind gold either … what’s behind it is a cultural norm, for thousands of years we liked gold.” “We do it as a store of value, so bitcoin is a modern form of digital gold. It’s a social construct,” he continued.
The good thing about the latest Congressional hearing that it was more inclined towards discussing technical and innovative aspect of digital currencies. The hearing comprised academics, engineers, and entrepreneurs from the cryptocurrency industry.