The U.S. Securities and Exchange Commission has stepped up regulation of those fundraising efforts. Commission Chairman Jay Clayton,and J. Christopher Giancarlo, the chairman of the Commodity Futures Trading Commission, wrote in a January Wall Street Journal commentary that, “The SEC is devoting a significant portion of its resources to the ICO market.”
The SEC’s announcement last week that it will require digital asset exchanges to register with the agency helped send bitcoin prices below the key $10,000 level. Bitcoin fell 9 percent Wednesday, below $8,300.
Rep. Bill Huizenga (R-Mich.), chairman of the subcommittee, pointed out that the session was “hello and not goodbye” when it comes to the regulating the “crypto craze.”
“We know that this has moved very quickly,” Huizenga said. “This panel, this Congress is not going to sit by idly with a lack of protection for investors.”
Huizenga referenced a soon-to-be published study of the ICO market by MIT professor Christian Catalini, which estimates that $270 million to $317 million of the money raised by coin offerings has “likely gone to fraud or scams.”
Mike Lempres, chief legal and risk officer of Coinbase, was among those testifying before the Capital Markets, Securities, and Investment Subcommittee. Twenty percent of the company’s workforce is committed to compliance, and Coinbase is “waiting for the dust to settle” before actively engage supporting ICOs, he said.
“Once the rules are clear we will move in,” Lempres said.
Committee member Rep. Carolyn Maloney (D-N.Y.) called attention to the lack of investment protection for digital currency investors.
“They’re pouring their life savings into virtual currencies and they stand to lose a lot of money when this bubble eventually bursts,” Maloney said.
She said she is working on a bill that “would regulate virtual currencies but not the technology,” with “robust” investor protections, including disclosures that will be regulated by the SEC.
Rep. Tom Emmer (R-Minn.) advocated for a more hands-off approach.
“This is something that Democrats and Republicans should be celebrating here in Congress not going ‘oh my gosh, this is terrible, we don’t understand it’,” said Emmer, who is a member of the Congressional Blockchain Caucus.
He urged members of Congress not to search for “new policemen” and not to “take the policemen we already have and give them more powers to start to invade this space and perhaps frustrate the development.”
“I realize there has to be some regulation but there needs to be a balance,” he said.