May 15, 2018
U.S. regulators are still looking into cryptocurrencies and initial coin offerings, but don't aim to suppress the industry, according to comments made during a panel at CoinDesk's Consensus 2018 conference in New York.
Commodity Futures Trading Commission (CFTC) enforcement director James McDonald, Securities and Exchange Commission (SEC) Enforcement Division Cyber Unit chief Robert Cohen and associate deputy attorney general Sujit Raman participated in a panel discussion on enforcement activities in the space Tuesday. They were joined by Kiran Raj, chief strategy officer at crypto exchange Bittrex, with the panel moderated by attorney Steve Bunnell.
The government representatives, who disclaimed that they only spoke for themselves and not their respective agencies, notably all agreed that they did not want to hinder innovation or interfere unduly with blockchain or the tokens built on the nascent technology.
That said, they all also stated that they had to act against those seeking to defraud or outright steal from participants in the space.
Cohen and McDonald both said their agencies had "open-door policies" for those trying to launch token sales, with Cohen explaining:
"The SEC has been open about meeting with people from the industry, to come in and meet with the staff, to talk about the ideas you have, the new developments, and have a dialogue about the new technology. The commission encourages ways to raise capital, we don't regulate the technology – we regulate the financial industry and the markets."
On actually regulating the space, McDonald noted:
"Our mission is to foster financially sound markets, and we understand as a regulator that requires a certain amount of [flexibility] in our approach. We're doing it in a way that doesn't hinder innovation and doesn't interfere with other regulatory priorities."
Raman similarly cited a need to protect Americans as the focus for any actions taken by the Department of Justice, saying:
"The number one priority for the Department of Justice is to keep people safe. One concern we have for the larger virtual currency space is large sums of money are flowing through the market without touching financial institutions … From a national security perspective or an anti-money laundering perspective, that's something … we have to investigate. As with anything else, it's a balance but it's certainly one of our priorities, to know what's going on."
When asked about his concerns, Bittrex's Raj pointed to a lack of regulatory clarity surrounding token sales:
"One of the big pieces of feedback I get … is we need more certainty. One of the main things we get is we hear about fraud … we agree, we don't want them in the industry. The problem is how do we take guidance and apply it to what you're doing when it's so far away from what the fraud people are doing?"
McDonald agreed, saying:
"LabCFTC is providing their expertise to make sure we end up in the best place possible. We're careful not to be putting ourselves out there in the same way that the policy divisions would be but the policy divisions are having conversations with market participants."
However, Cohen said the SEC has released guidance on tokens, saying:
"The main issue is whether the token or whatever asset you have is a security, and the commission has put out guidance on that. If a firm or person is making a good-faith effort to comply with the law, and one step to that is if they're talking to regulators, [we'll work with them]."
For those who do seek to defraud others, Cohen said:
"It's clear when people are not making good-faith efforts to comply, and that's when we step in."