Washington’s “Septuagenarian leadership” has slowed the effective regulation of cryptocurrency and decentralized finance, Christopher Giancarlo, the former chairman of the Commodity Futures Trading Commission (CFTC), said at a conference today (July 28).
Giancarlo argued that existing securities laws (and others) are sufficient to regulate the cryptocurrency industry, which has seen tremendous turmoil this year. But the regulatory process has stalled in recent years, he said, because the relevant authorities are too old to understand the technology.
“It’s a new architecture of money,” he said. “The new generation gets it.”
The conference took place at the New York Stock Exchange and was presented by Solidus Labs, a firm that monitors risk in the crypto market.
Conference attendees generally agreed that the world of cryptocurrency and decentralized finance needs to be regulated. They also agreed that these burgeoning sectors posed clear threats to the broader economy, but compared the situation to the aftermath of the 1998 collapse of Long Term Capital Management and the bursting of the dot-com bubble in early 2000. No matter how antiquated the existing is regulatory system could be, they argued, it was possible to contain the damage.
“It’s all about risk management failures,” said CFTC Commissioner Caroline Pham, referring to both the recent turmoil in the crypto market and past disruptions.
Speakers at the conference also agreed that Congress had a crucial role to play, and this is where the criticism of “seventy-year leadership” came into play. Pham was emphatic in saying that it is up to Congress, not regulators, to set the rules, but if it isn’t done for political or generational reasons, market innovation will suffer.
A key area in this category is jurisdiction: There are several government agencies with plausible dominion over the crypto/defi space, including the CFTC and the Securities and Exchange Commission (SEC). Giancarlo proposed a schematic distinction: the SEC oversees companies involved in capital formation – stocks, bonds – while the CFTC deals with risk transfer. The CFTC, he said, doesn’t regulate how wheat is bought or sold, for example, but it does regulate the wheat futures markets.
As useful as this scheme may be, how it can be meaningfully applied to cryptocurrencies remains unproven. There are thousands of coins, and as the US government argued earlier this month, much to the dismay of Coinbases, some of them might be securities and some might not.
