CFTC Chairman Says Cryptocurrency Needs ‘Do No Harm’ Approach

CFTC Chairman J. Christopher Giancarlo said he advocates a "do not harm" approach for cryptocurrencies. Here, Giancarlo discusses financial regulation in Washington, D.C., Oct. 3. 2017. Photo: REUTERS/Joshua Roberts

By Ranjitha Shastry, International Business Times

The Commodity Futures Trading Commission Chairman J. Christopher Giancarlo said he favored a limited regulatory approach to cryptocurrencies to let them develop. The CFTC chief spoke to CNBC at the Singapore Summit on Sept. 14 and discussed his views on a framework for cryptocurrency regulations.

Giancarlo compared cryptocurrency to the internet, which he said flourished because regulators didn't step in rigidly but rather applied a careful, "do no harm" approach.

"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," he said.

At the same time, Giancarlo also pointed out that some regulation was required because fraud and manipulation often seen in foreign exchanges and precious metals were now taking place in cryptocurrency markets.

"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," he told CNBC.

As for criticism that regulators were moving slowly when it came to regulating cryptocurrencies, Giancarlo denied such allegations, pointing to how bitcoin futures were now allowed in the U.S.

"Some would say we're too slow, others have said we've been too fast. So, we at the CFTC, saw the very first regulated offerings of bitcoins futures," he said. "No other regime in the world has allowed this to go forward."

CFTC — which regulates commodity, futures, and derivatives markets — first determined that virtual currencies or cryptocurrencies are commodities in 2015. A federal judge ruled in March 2018 that virtual currencies like bitcoin could be regulated as commodities by the CFTC.

Both the CFTC and Securities and Exchange Commission have cautioned about the need to combat fraud in virtual currency markets. CFTC in July issued warnings to consumers, advising them to exercise caution and carry out comprehensive research before investing in any cryptocurrencies, including those advertised as utility coins or consumption coins. The alert came in the form of a customer advisory warning posted on the CFTC website, and said potential investors should be wary of coins or crypto schemes that over-promise or guarantee some kind of future value or return.

CFTC’s opinion on cryptocurrencies has historically been positive. In June, at the New York City BFI Summit, CFTC Commissioner Rostin Benham noted cryptocurrencies were “here to stay.”

“Virtual currencies may – will – become part of the economic practices of any country, anywhere,” Benham said. “Let me repeat that: these currencies are not going away and they will proliferate to every economy and every part of the planet. We are witnessing a technological revolution. Perhaps we are witnessing a modern miracle."

In May, Giancarlo outlined that, "bitcoin and a lot of its other virtual currency counterparts really have elements of all of the different asset classes, whether they’re meeting payment, whether it’s a long-term asset," he told CNBC on "Fast Money."

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