In a Senate Hearing, CFTC and SEC Chairpersons Talk About Crypto Volatility, ICOs and Regulations

In a Senate hearing her yesterday on Tuesday, Feb 6, the heads of two top regulatory agencies of the U.S shared the dais to discuss the ongoing finch revolution in cryptocurrencies, blockchain and ICOs. Of course one of the central themes of discussion was the regulatory measures, they also discussed about the price volatility surrounding the cryptocurrencies.

The hearing that was held by the Senate Committee on Housing, Banking and Urban Affairs touched a broad range of issues like regulatory concerns, blockchain technology, Bitcoin investment products like ETFs and derivatives, Initial Coin Offerings and others.

During their opening statement, both - Securities and Exchange Commission chair Jay Clayton and Commodity Futures Trading Commission chair J. Christopher Giancarlo - said that regulatory measures still need a proper attention and framework as they are currently being controlled only at the state level rather than at the federal level. They also said that at some time in future, the Congress might want to increase federal regulators ability in order to oversee the spot markets.

CFTC Chairman, Christopher Giancarlo made specific emphasis on the blockchain technology and its benefits of how that technology can be used across multiple sectors of businesses. He cheered up some of the Bitcoin enthusiasts by stating It’s important to remember that if there was no Bitcoin, there would be no blockchain.” However, drawing the line of caution, he further stated that digital currencies will likely require more attentive regulatory oversight” in regards to fraud and manipulation.”

He concluded by saying that CFTC and SEC should probably leave more room for their growth. Mr. Giancarlo said: As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response.”

On the other hand SEC Chairman, Jay Clayton was a bit of less optimistic about cryptos but couldn’t deny that role in the existing financial system. Mr. Clayton said: “To be clear, I am very optimistic that developments in financial technology will help facilitate capital formation, providing promising investment opportunities for institutional and Main Street investors alike. From a financial regulatory perspective, these developments may enable us to better monitor transactions, holdings and obligations (including credit exposures) and other activities and characteristics of our markets, thereby facilitating our regulatory mission, including, importantly, investor protection.”

When asked about the volatility that the cryptocurrencies do exhibit, both of them seemed to share a common opinion that Bitcoin’s volatility is still not par with the VIX Index, known more commonly as the "fear index.”

"Bitcoin's volatility was not as large as other asset classes like [the] VIX. We have seen extreme volatility in bitcoin but in our world [commodities], we are used to volatility in asset classes," said CFTC Chairman Christopher Giancarlo.

On the other hand, Clayton while bluntly replying to the volatility factor stated "I don’t really know what’s driving volatility in bitcoin and cryptocurrencies. [Cryptocurrencies are] not correlated with sovereign currencies, so it must be something different than what would move the dollar. But that's one of the issues before us – there does appear to be a lot of volatility compared to the medium they are supposed to be replacing.”