US CFTC Official Tackles Accountability in an Era of Smart Contracts

The CFTC’s Brian Quintenz has addressed the question of accountability in an era of disintermediated finance and smart contracts.

The U.S. Commodity Futures Trading Commission (CFTC)’s Brian Quintenz has addressed the question of accountability in an era of disintermediated finance and smart contracts. The commissioner made his remarks at the 38th Annual GITEX Technology Week Conference in Dubai Tuesday, Oct. 16.

Broadly, the commissioner proposed that when it comes enforcement actions, not only users, but the coders themselves may be held to account. Quintez explained:

“The appropriate question is whether these code developers could reasonably foresee, at the time they created the code, that it would likely be used by U.S. persons in a manner violative of CFTC regulations.”

Quintenz framed his discussion by noting the complications that arise when applying traditional legal paradigms to “the disintermediated world of blockchain,” emphasizing the challenges that the emerging sector poses to the CFTC’s particular role, which is intermediary-focused and centers on preserving market integrity through oversight.

In the case of disintermediated finance, however, the key players are instead the core developers of a given blockchain network, its miners and users, all of whom operate in an “anonymous, decentralized” framework.

To tackle the regulatory concerns raised by this context, Quintenz focused in particular on smart contracts, which function on a blockchain and are programmed to interact according to binding, pre-specified rules.

As Quintenz noted, these contracts are “self-enforcing,” and “operate without further intervention.” However, he rebutted the well-known crypto adage “code is law,” arguing that even though smart contracts complicate existing frameworks and the question of accountability, they nonetheless fall subject to regulations and particular legal precedents.

In many cases, he argued, the basic nature of such contracts can be identified as having the “essential characteristics” of traditional derivatives products: they may resemble a swap, or have “exchange-like functions by facilitating trading.”

One such example would arise with individuals who develop “predictive data about future financial events, like a stock’s performance […] [and] offer their data for purchase via smart contracts.”

The offering of this data could fall under regulators’ purview either through being deemed “investment advice,” or even, “given the anonymity of the predictions,” being considered to be “nefariously” enabling ”insider trading.”

In other cases, smart contract protocols enable “individuals to bet on the outcome of future events, like sporting events or elections” using crypto, which he suggested can in some cases resemble what the CFTC considers to be a “‘prediction market,” noting that:

“In the past, the CFTC has generally prohibited prediction markets as contrary to the public interest, only permitting them in limited circumstances when it has found that they operate on a small-scale, non-profit basis, and serve academic purposes.”

As reported yesterday, former CFTC chairman Gary Gensler emphasized that most tokens sold through Initial Coin Offerings (ICOs) should be classified as securities, and be brought under the regulatory purview of the U.S. Securities and Exchange Commission (SEC).  

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Nouriel Roubini Versus Blockchain: Notes from the Senate Floor

The famous crypto-hater testified to the US Senate committee alongside the blockchain advocate Peter Van Valkenburgh.

Normally, there is very limited room for drawing legitimate comparisons between a Senate hearing and an Mixed Martial Arts (MMA) fight. Yet the hearing entitled “Exploring the Cryptocurrency and Blockchain Ecosystem,” which took place on October 11, 2018 on the US Senate’s Committee on Banking, Housing & Urban Affairs’ floor, definitely bore quite a few similarities to a hyped sporting event that had made big waves just a few days ago. Two witnesses who were brought to testify on issues and promises of crypto stood by polarising views on the subject matter, albeit they expressed these views with varying intensity.

On the pro-crypto side, there was Peter Van Valkenburgh, Director of Research at Coin Center, a reserved yet very articulate speaker. In the opposite corner, there was Nouriel Roubini. Roubini or “Dr. Doom”, whose reputation is mainly founded on the prediction of the 2008 housing bubble crash, would be the fighter who does trash talking. In the buildup to the hearing, he fired a long series of vehement tweets, bashing blockchain and its supporters, picking local fights and bragging about having debated best crypto gurus and “beating them by a wide margin”.

Into the hearing

Chairman Mike Crapo, a Republican Senator from Idaho, opened the proceedings with a statement that gave a nod to Bitcoin’s unique status as the first ever digital asset, and highlighted how the bulk of the latest news on crypto has been negative, including falling prices and regulatory woes. Ranking member Sherrod Brown of Ohio weighed in to point out that it was almost Bitcoin’s tenth anniversary, yet the space is still rife with fraud and misconduct, while tangible applications are scarce. He mentioned regulatory issues and referenced the famous statement by Jay Clayton, the chairman of the US Securities and Exchange Commission, as well as the recent report by the Attorney General of New York that was anything but complementary to biggest crypto exchanges. Brown implied, however, that blockchain could be potentially useful for improving the lives of the unbanked and underserved.

Roubini’s testimony

In his speech, the New York University professor followed rather closely the rambling argument presented in his 30-page written statement. In addition to a constellation of derogatory terms – it is quite likely that for many senators this became the first encounter with terms like ‘shitcoin’ – Roubini developed several central talking points that he would reiterate dogmatically throughout his testimony and on to the Q&A session. He argued that the whole crypto ‘asset class is imploding’ now, following the steep decline of prices compared to late 2017, and educated senators on the study that identified 80 percent of initial coin offerings (ICOs) in the same year as scams. He added that digital assets are useless as currency, since they are unable to serve as unit of account, means of payment, or store value.

A recurrent theme in Roubini’s account was superiority of centralized payment systems to blockchain-based ones. Several times he brought up the claim that the Bitcoin network’s throughput is only five transactions per second, while Visa can process up to twenty-five thousand transactions per second. Other attacks included assertions that ‘nobody uses it for transactions,’ except for criminals and terrorists, while mining is an ‘environmental disaster.’

Roubini also offered a rather unconventional view of what constitutes the realm of fintech. He claimed that, indeed, there is a revolution in the financial services industry currently going on, yet it has nothing to do with blockchain. Instead, it is allegedly powered by artificial intelligence, big data, and the Internet of Things (IoT), and displays in proliferation of centralized digital payment systems.

Meanwhile, the crypto libertarian dream of total decentralization is ‘utter nonsense.’ In fact, Roubini claims, ‘crypto land’ is subject to the opposite trend: heavy centralization of mining – which is apparently controlled mainly by Chinese and Russian oligopolies, trading at the hands of centralized exchanges that are ‘hacked daily’, and development reserved for a narrow tech elite that arbitrarily changes code and forks coins whenever things go wrong.

Against this background, massive manipulation permeates the ‘crypto land,’ where pump & dump schemes, spoofing, and insider trading call the shots. In Roubini’s view, stable coins exist for the sole reason of manipulation; security tokens break all security laws, and utility tokens pave the way back to the Stone Age, where barter was prevalent. According to Roubini, even the “Flintstones knew better,” as they used clams as a universal currency.

Finally, corporate permissioned ledgers received their fair share of beating: according to Roubini, they are no more than ‘glorified databases,’ and they have no relation to the concept of blockchain.

Van Valkenburgh’s testimony

Right after Roubini’s furious charge, a composed account that Coin Center’s Van Valkenburgh delivered sounded almost soothing. The crypto advocate decided not to overcomplicate things, and dedicated a huge share of his time to explaining what Bitcoin is, what it does, and why is it revolutionary. Unlike cash, which only works face-to-face, Bitcoin is the world’s ‘first globally accessible public money.’ It is not yet ‘perfect or stable,’ yet it is working. Similar to the early years of the internet, the technology is full of loopholes and inefficiencies, but this is by no means a reason to abandon it.

Various kinds of human interactions, Van Valkenburgh maintained, are riddled with state or corporate chokepoints. Like the internet had removed such chokepoints from the realm of communication, blockchain’s promise is to do away with single points of failure that are inherent to other interaction systems’ designs – such as that of monetary transaction systems. Giant private corporations are increasingly prone to security failures, such as electronic bank robberies and massive personal data leaks. The rise of IoT makes such concerns even more grave, as even cars and pacers can now be targeted. According to Van Valkenburgh, no critical infrastructure has to have a single point of failure, and to achieve that, we need a ‘light-touch, pro-innovation’ policy in place.

Questions

Chairman Crapo opened up the floor for questions on where the crypto markets are headed next year, and what conditions need to converge in order for them to stabilize. Van Valkenburgh responded that volatility is raging due to the markets having a hard time with finding a level, a fair price for something very new and disruptive. However, institutional money have already brought some sense of stability: it’s been beneficial to have  Commodity Futures Trading Commission (CFTC) regulated crypto derivatives enter the market, but it would be even better if the SEC allows the trading of crypto-based exchange-traded funds. Having a nationally chartered bank for crypto custody would bring even more rationality to the market.

Criticisms thrice told

Roubini responded to this point with the argument that cryptocurrencies are not scalable, not decentralized, and not secure, seasoning his response with the same points about five transactions per second, widespread oligopolies, and no authority to go to in case if one’s funds get stolen. Crapo pressed on, asking what hinders faster development of decentralized computing technologies’ real-world applications. Van Valkenburgh deflected this with a reference to email, which first appeared in 1972 and took a couple of decades before going mainstream, while Roubini said that no government or corporation will use permissionless decentralized systems. The idea of decentralization, he maintained, “won’t fly, because it’s nonsense”.

Ranking member Brown inquired whether there are blockchain-based applications ‘on a broader scale,’ which Roubini took as a chance to dismiss permissionless blockchains again, grudgingly admitting that there is some useful innovation in the sphere of private distributed ledgers. Again, he lauded payment systems like Paypal, China’s WeChat Pay, and African M-Pesa as the ‘real revolution,’ dismissing decentralized crypto systems as being losing users and transactions. While the internet had a billion users after a decade in existence, he added, cryptocurrencies command the following of just 22 million.

As Senator Brown asked to describe a typical crypto investor, Van Valkenburgh painted a portrait of a young, tech-savvy person, and quickly moved to a more policy-relevant conversation. After praising the US Financial Crimes Enforcement Network’s (FinCEN) trailblazing efforts in laying the groundwork for crypto investors’ protection, he criticized the current state-by-state approach to money transmission licenses’ issuance to crypto enterprises, and called for federal licensing system.

Bridging gender gaps & standing up to totalitarians

Senator John Kennedy of Louisiana demanded how the world got better since cryptocurrencies came into existence. Van Valkenburgh offered a story of an Afghani female entrepreneur who used crypto to pay her mostly female employees’ wages, which was the only way to do it in a society where women are especially underserved by banks, while few accounts that exist are often controlled by male relatives. Roubini, once again, brought up superiority of centralized payment systems and Bitcoin’s meager five transactions per second. He then went on to complain about concentration of miners in places like China, Russia, and – for some reason – Belarus and Georgia, claiming that these nations will use their alleged oligopolistic dominance to manipulate the US.

Van Valkenburgh retorted that with payment infrastructures like the Chinese WeChat Pay, users’ transaction records and personal details reside without encryption in centralized repositories, ready to be hacked or surveilled by the government, if needed. Such systems, he argued, are ‘tools for totalitarians.’

A word on security

Doug Jones of Alabama was concerned with the extent to which ‘bad guys’ and rogue nations can exploit the decentralized design of public blockchains. Van Valkenburgh noted that every worthy technology, especially at the early stages of development, gets exploited by shady characters – if it does not, it is probably not very useful. At the same time, he contended, US law enforcement is already quite comfortable for tracking illicit transactions on open ledgers. Roubini took to bemoaning the dangers of blockchains’ anonymity.

Potential for scaling

Pennsylvania senator Pat Toomey jumped in, showing off his intimacy with blockchain fundamentals and jargon. He said that while crypto assets are riddled with flaws, central banks do not have a flawless record of frictionless operations either. He suggested that an asset being a currency or not is just an issue of scale, and asked whether cryptocurrencies are fundamentally not scalable. Toomey was also interested whether the oligopolistic tendencies in mining really mattered for cryptocurrencies’ capacity to operate securely.

Van Valkenburgh delved into an overview of various scaling solutions, particularly highlighting the potential of batch settlement. He added that with oligopoly, you cannot really do much more to the network than denial-of-service attacks. Roubini’s response was anything but surprising:  five transactions per second, centralized mining, not secure. He explained that 51 percent attacks are a reality – they happen ‘every day’ with minor coins. Transactions costs “have gone through the roof,” while massive economies of scale implicit to mining operations incentivize cartelization.

ICO woes

Elizabeth Warren of Massachusetts was wondering how the theft of an aggregate $1.1 billion in the first half of 2018 was possible, as well as what could be done with the 80 percent rate of scam ICOs.  Van Valkenburgh explained that most of the funds stolen were in obscure alternative coins from overseas exchanges that failed to scale up their security systems to match the value they came to store. He also said he was on the same page with those who identify ICOs as securities, but added that it is entirely possible to have an ICO and comply with all the relevant securities regulations.

Maryland’s Chris Van Hollen appeared to be marginally interested in crypto affairs specifically. He lamented how the Fed was sluggish in moving towards a real-time payment system, blockchain-based or not, and moved on to solicit Roubini’s advice on the overall state and near perspectives of the US economy. The famed economist did not sound optimistic, suggesting that it’s possible that growth would stall by 2020.

Global KYC standards

Catherine Cortez Masto from Nevada was the last to pose questions. She asked if there are any provisions in the bitcoin protocol that enable detection of payments that go to human trafficking, drug trafficking, or money laundering. Van Valkenburgh responded that policing such activities is incumbent upon the businesses that operate on top of the blockchain, as well as law enforcement. Roubini noted that such policing won’t be efficient unless there is a globally ratified set of rules in place. Van Valkenburgh agreed that such a unified approach to know your customer (KYC) procedures are needed, marking a rare moment of solidarity with the opponent.

Finally, Cortez Masto asked Roubini whether he believed in blockchain technology’s successful applications beyond finance, to which he responded, once again, that no serious government or corporation would ever entrust an open, trustless, permissionless distributed system with any sensitive information. ‘It’s just nonsense!’ – he concluded.

Chairman Mike Crapo reminded senators that additional questions to witnesses, if any arise, are due within one week, and adjourned the hearing.

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US SEC Halts Fraudulent ICO That Claimed to Possess Regulator’s Approval

The U.S. Securities and Exchange Commission has halted an ICO that falsely claimed the support of the SEC and used a fake regulatory agency to promote their product.

The U.S. Securities and Exchange Commission (SEC) has halted a planned Initial Coin Offering (ICO) that falsely claimed have SEC approval, the agency reported in an official press release Thursday, Oct. 11.

The SEC suspended the ICO project with an emergency court order, and also halted pre-ICO sales by the company Blockvest LLC, and its founder Reginald Buddy Ringgold III.

The complaint by the SEC alleges that Blockvest falsely claimed that their ICO and affiliates had acquired approval from major financial regulators, including the SEC itself. Blockvest and Ringgold — who also goes by the name Rasool Abdul Rahim El — claimed the crypto fund was “licensed and regulated.”

The firms are accused of violating federal law by impersonating the SEC seal, as well as running an ICO promoted by a fake agency dubbed the “Blockchain Exchange Commission.” The “Commission” reportedly used a graphic similar to the SEC seal, as well as the SEC address.

According to the SEC, Blockvest and Ringgold also violated the law by continuing their fraudulent activity after receiving a cease-and-desist letter by the National Futures Association (NFA).

Following the SEC’s complaint, the U.S. District Court for the Southern District of California issued an order freezing Blockvest and Ringgold’s funds as well as suspending their securities registration provisions. The hearing is set for Oct. 18, and will consider prolonging the preliminary injunction and the asset freeze.

Other firms have attempted to defraud investors by make spurious claims about their status with federal regulators. On Sept. 28, the U.S. Commodity Futures Trading Commission (CFTC) filed a suit against two companies for alleged fraudulent solicitation of Bitcoin (BTC). The companies were also impersonating a CFTC investigator, as well as using forged official documents to pose as the the CFTC’s General Counsel with the CFTC’s official Seal.

The SEC’s Office of Investor Education and Advocacy, and the CFTC Office of Customer Education and Outreach have issued an investor warning on the use of false claims regarding SEC and CFTC endorsements.

Earlier this year, the SEC Office of Investor Education and Advocacy launched a fake ICO website, intended to increase awareness of the typical warning signs of scam ICOs and promote investor education.

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One Blockchain to Rule Them All: Congressmen’s Mission to Define the Technology

What “Blockchain Promotional Act 2018” might mean for the US industry.

Last week, two US lawmakers introduced a bill dubbed the “Blockchain Promotional Act 2018” in the House of Representatives. Its main purpose is to establish a common definition of ‘blockchain’ technology along with a blockchain working group that would potentially overview studies for federal adoption of the technology.

Here’s what the bill might mean for the US regulatory landscape, which has been (albeit significantly slowly) moving towards recognizing the industry over the past few months.

What do we know about the ‘Blockchain Promotional Act 2018’?

The document was introduced by two members of the House of Representatives — California democrat Doris Matsui and Kentucky republican Brett Guthrie — on September 26. Matsui first announced she was working on such legislation during a House Energy and Commerce Committee Subcommittee on Digital Commerce and Consumer Protection hearing in July 2018:

“I’ve discussed the potential of blockchain applications in this subcommittee before,” Matsui stated. “These include its possibility to facilitate spectrum sharing as next generation broadband networks are deployed, maintain patient health records, and secure business transactions and communications between Internet of Things networks.”

Further, Matsui stressed that she believes a common definition will help drive innovation and ease deployment across both the public and private sectors, while the technology’s growing popularity leads to distortion of its definition:

“In its basic and essential element and function, blockchain is a decentralized ledger technology […] But as the hype surrounding blockchain and its applications grow, how exactly blockchain is defined has become less clear. More fundamentally, there is no agreed upon definition of ‘blockchain.’”

Why a common definition of blockchain is important for the regulatory landscape

Matsui and Guthrie’s bipartisan bill follows the Information Security and Privacy Advisory Board (ISPAB) meeting that occured on June 25. During the session,

Tiffany Angulo, a staff co-chair of the Congressional Blockchain Caucus (a platform for the industry and government collaboration to examine the implications of blockchain and virtual currencies), warned that blockchain development could turn into a “patchwork system”, because states pass laws with different definitions of the technology. Angulo argued that blockchain required greater federal guidance and standardization to ensure that the technology is applicable across the nation:

“If you’re an insurance broker and you have contracts in different states, you’re going to have different regulations in each state.”

Interestingly, California, and Arizona, two states who have passed their blockchain-related bills, have used the same definition of blockchain. Thus, both California’s Assembly Bill 2658 and Arizona’s House Bill 2602 define blockchain technology as a “distributed ledger technology that uses a distributed, decentralized, shared, and reciprocal ledger, that may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable, is auditable, and provides an uncensored truth.”

How the ‘Blockchain Promotional Act 2018’ attempts to tackle blockchain-related issues

The new bill proposes that the U.S. Department of Commerce create a working group formed both by federal officials and members of the blockchain industry to form a common definition of blockchain.

According to the press release published on Matsui’s website, the working group will also consider recommendations for the National Telecommunications and Information Administration (NTIA) and Federal Communications Commission (FCC) to study the potential impact of blockchain on spectrum policy and opportunities for federal adoption of the technology. Matsui further explained the main purpose of the bill, citing the technology’s potential:

“Blockchain technology could transform the global digital economy. Opportunities to deploy blockchain technology ranges from greatly increased transparency, efficiencies and security in supply chains to more-opportunistically managing access to spectrum.”

More action in Congress: the long road to federal regulation

Matsui and Guthrie join other congresspeople who have been calling for federal legislation for cryptocurrencies and blockchain. Thus, in September, Minnesota republican Tom Emmer who is also a co-chair of the Congressional Blockchain Caucus, announced three upcoming bills on the matter.

Dubbed the “Resolution Supporting Digital Currencies and Blockchain Technology” the “Blockchain Regulatory Certainty Act” and the “Safe Harbor for Taxpayers with Forked Assets Act”, the legislations focus on the support and development of blockchain, as well as the establishment of a safe harbor for taxpayers with “forked” digital assets. Emmer further commented on the initiative:

“The United States should prioritize accelerating the development of blockchain technology and create an environment that enables the American private sector to lead on innovation and further growth, which is why I am introducing these bills.”

Around the same time, a group of more than a dozen lawmakers from Congress sent a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, calling for regulatory clarity regarding cryptocurrencies. The congressmen urged Clayton to tell investors how the SEC plans to regulate virtual currencies:

“It is important that all policy makers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately, through formal guidance or legislation.”

Ironically, it seems that the current problem with regulation in the US is two-sided: regulating bodies like the SEC and Commodity Futures Trading Commission (CFTC), whom congressmen ask for clarity on their stance towards cryptocurrencies, have been continuously extending their purview within the crypto industry during the past few months.

However, they move with extra caution, citing the absence of comprehensive crypto legislation coming anytime soon. For instance, CFTC’s Chairman Christopher Giancarlo have stated that he doesn’t see such a framework coming from the federal level in the near future, pointing out that the statutes by which the CFTC is operating were written in 1935, and embracing something “as new and as innovative” as Bitcoin within such terms will take time.

The bipartisan bill introduced by Matsui and Guthrie, if approved, could ease government’s interaction with blockchain and potentially make the industry more attractive for local mainstream businesses who will get an official definition for the technology, and thus more options to explore it.

Nevertheless, it is impossible to tell if the bill is going to be approved at this point, and what precise impact it will have on the US legal system and crypto market. Cointelegraph has reached out to the DC-based non-profit industry-oriented outlets Blockchain Association and Coin Center for further comment. The latter has not replied to date, while the Blockchain Association representative limited his answer by sharing the following statement:

“We believe in the transformative potential of this technology and as this new working group comes together we look forward to continued collaboration with Congress to push for responsive regulation that spurs innovation and protects consumers.”

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US: CFTC Chair Notes Crypto Cases in Record Year of Enforcement Actions

At a recent event in Minneapolis, CFTC chairman Christopher Giancarlo noted increased enforcement actions last year, partly due to fraudulent crypto cases

Christopher Giancarlo, the chairman of U.S. Commodity Futures Trading Commission (СFTC), said in an Oct. 2 speech that enforcement actions and fines increased significantly in the last fiscal year.

Giancarlo presented at the Economic Club of Minnesota, stating that the enforcement of the recent fiscal year, which ended September 30, was “among the most vigorous in the history of the CFTC.”

The CFTC filed 83 enforcement actions in the last fiscal year, representing a 25 percent increase from the last three years of the previous administration. The CFTC levied as much as $900 million in penalties this fiscal year.

The watchdog has also reached settlements from $30 million to $90 million that are reportedly connected with interest-rate benchmark manipulation with banks such as JPMorgan Chase & Co., Deutsche Bank, and Bank of America, among others. Giancarlo noted cryptocurrencies among the commission’s enforcement actions over the course of the last year:

“We have not been shy to take these cases to trial, winning significant trial victories in this area over the past year—including a precedent setting victory in a trial involving Bitcoin (BTC) fraud.”

The chairman also noted inter-agency collaboration in bringing charges against Marshall Islands-based international securities dealer 1 pool Ltd., and its project 1broker.com:

“We brought the action charging the portion of the activity involving derivatives, the SEC charged the portion relating to equities, and DOJ and the FBI secured an order seizing the platform’s website and shutting it down.”

Earlier this year, an undercover Federal Bureau of Investigation (FBI) agent purchased security-based swaps on 1broker’s platform from the U.S. without complying with requirements set by federal securities laws. The CFTC and the Securities and Exchange Commission (SEC), subsequently filed complaints against the firm.

In August, the commission permanently barred the operator and promoter of the CabbageTech Corp., who had previously been charged with “fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin (LTC).” Although the operator, Patrick McDonnell, insisted that the CFTC did not have the authority to regulate his commercial operations, the judge took the CFTC’s side.

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CFTC Chairman: Two-Thirds of Fiat Currency ‘Not Worth Paper It’s Written On’

printing money

The head of the US regulator Commodity Futures Trading Commission (CFTC) sees Bitcoin or other cryptocurrencies helping consumers escape fiat currency in the majority of the world by 2028. Giancarlo: Cryptocurrencies ‘Here To Stay’ As part of comments to CNBC about cryptocurrency regulation in the US, chairman J. Christopher Giancarlo described “two thirds” of fiat currencies currently in circulation as “not worth the polymer or the paper they’re printed on.” “I personally think cryptocurrencies are

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CFTC Chair: Crypto Needs ‘Do No Harm’ Approach That Regulators Gave the Early Internet

U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo has said that crypto needs a “do no harm” approach from regulators to flourish.

U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo has said that crypto needs a “do no harm” approach from regulators to flourish, in an interview at the annual Singapore Summit today, Friday 14.

Chairman Giancarlo said he took the precedent from the early days of the Internet, which he argued was able to develop and mature because of the government’s minimal interventions:

“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.”

Nonetheless, he distinguished between the CFTC’s short-term approach to tackling illicit activity on the crypto markets, and the agency’s longer-term – and potentially critically impactful – decisions on policy making for the nascent industry:

“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 Chairman also rebutted accusations that the U.S. regulatory context for crypto has been slow to take clear shape, noting that the CFTC had presided over the “very first” regulated offerings of Bitcoin (BTC) futures, which launched on December 2017 on the stalwart American CME and CBOE exchanges.

The question of how cryptocurrencies should be defined and which agencies are responsible for their regulation have long been debated by U.S. regulators. A U.S. House hearing earlier this summer encapsulated the unique challenge posed by crypto, with speakers emphasizing that digital assets complicate the hard and fast distinctions of existing regulatory frameworks.

This year two federal judges have ruled on major cases that confirmed the applicability of federal commodity regulations to Bitcoin under the CFTC’s oversight, as well as – just this week – the applicability of U.S. securities laws for prosecuting crypto fraud allegations.

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LedgerX Introduces CFTC Licensed Bitcoin Savings Accounts

LedgerX has introduced a Bitcoin savings product licensed by the CFTC. The Bitcoin asset management platform has designed this new product to cater to long-term hodlers. The LedgerX Bitcoin ‘Call Overwrite’ Launched on May 15th, the LedgerX Bitcoin savings account enables investors to earn a fiat-based yield on their Bitcoin holdings. Instead of hodling in the hope of a significant price increase, savers can now earn revenue from a call overwrite. Usually, overwrite contracts are for

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LedgerX Debuts First Bitcoin Savings Account Licensed By CFTC

LedgerX has launched the first BTC savings product licensed with both a CFTC derivatives clearing organization (DCO) license and a swap execution facility (SEF) license.

Trading and clearing platform LedgerX has launched a new Bitcoin (BTC) savings product that is licensed by the US Commodities Future Trading Commission (CFTC), Forbes reported May 15.

The savings product introduced by LedgerX is certified by a CFTC derivatives clearing organization (DCO) license and a swap execution facility (SEF) license. Juthica Chou, Chief Operating Officer at LedgerX said:

“Everything we do requires both the licenses. And a lot of that is intentional, because by making it a package deal we can offer a number of services to our customers in a really clear, vertically integrated way.”

The licenses permit users to earn a yield on their Bitcoin assets. Rather than just “hodling” and hoping that Bitcoin appreciates, investors can earn a fiat-based yield on their BTC by employing what is referred to as a call overwrite technique, wherein an investor deposits BTC into LedgerX, then sells a call option at a slightly longer date, with a higher strike call option.

The project is designed to simplify BTC option trading to a basic point-and-click format, so “less sophisticated” bull traders can potentially get a premium price on their holdings. The product’s interface allows users to choose the implied rate they’re anticipating to earn and the number of BTC they wish to earn the yield on. Chou said:

“This interface will definitely be skewed to the long Bitcoin holders, who will likely only deposit bitcoin and who will want to earn interest off of that Bitcoin.”

According to Forbes, during the past three months, 70 percent of the trade volume of LedgerX has come from options, with an average trade size of $60,000. The options contracts will reportedly be available for a three-month and a six-month duration, while LedgerX charges a transaction fee for each service.

Yesterday, the Chicago Mercantile Exchange launched an Ethereum reference rate and real time index to the US dollar. The rates are offered in partnership with Crypto-Facilities, a UK-based digital asset exchange, that debuted the “first regulated” Ethereum futures last week.

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