Speaking at the Singapore Summit with CNBC, the chairman of the US Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo, noted that the Internet flourished because the government didn’t interfere with its development strongly and adopted a “do no harm” policy. He thinks that the same approach could be adopted for digital currencies. However, he believes that the authorities need to take a strong stance on manipulation and fraud.
No Prohibition on Innovation
Giancarlo suggests that regulators should refrain from inhibiting innovation but should rather be watchful of any manipulation in the market. He noted that the “do no harm” approach that the government adopted for the Internet helped it flourish significantly, and the same could be replicated in the case of cryptocurrencies. He said:
“And I’m advocating the same approach to cryptocurrencies and all things having to do with this new digital revolution of markets, and of currencies, and of asset classes.”
Giancarlo also suggests that the growing industry demands caution as fraud and manipulations are rampant. He said that the types of manipulation seen in precious metals and foreign exchanges are now being witnessed in cryptocurrencies as well. He added:
“When it comes to fraud and manipulation, we need to be strong. When it comes to policy making, I think we need to be slow and deliberate and well informed.”
The agency has been criticized for regulating cryptocurrency at a very slow pace. On this, Giancarlo commented:
“Some would say we’re too slow, others have said we’ve been too fast. So, we at the CFTC saw the very first regulated offerings of bitcoins futures. No other regime in the world has allowed this to go forward.”
SEC and CFTC Have Different Views on Cryptocurrencies
CFTC regulates the commodity, futures and derivatives markets in the US. It classified Bitcoin and other digital currencies as commodities. Earlier this year, a federal judge from Brooklyn ruled that cryptocurrencies could be considered as commodities. The judgment came during the hearing of a case against Coin Drop Markets, which offered its customers virtual currency trading advice without registering with the CFTC.
On several occasions, the Securities and Exchange Commission (SEC) has warned investors of fraudulent activities in the digital currency market. Initial coin offerings (ICOs) are one of the most fraud-prone areas in the market, and the SEC even went as far as creating a fake ICO website of its own called Howey Coin to alert users about these fraudulent practices.