You knew this was coming. A great piece published on CoinDesk on Sunday has delved into the looming battle between the SEC and the CFTC over who will regulate which pieces of the cryptocurrency pie in the US. We all know they want their part of this emerging market, but the fact remains that cryptocurrency is just positively vexing them as to how to define it. Meanwhile, the rest of the world marches on. ICOs that can’t get done in the US simply go offshore, Russia invests $100M to amp up bitcoin mining and here we are in the US, figuring out how to regulate this all while the market streams by at the speed of light.
“There is more than meets the eye to recent announcements that LedgerX and CBOE will soon be offering digital currency derivatives in the U.S.
In addition to delivering new financial products to the public, these initiatives may also usher the U.S. Commodity Futures Trading Commission (CFTC) into the underlying digital currency markets. If so, this would be a regime change in how cryptocurrency trading is regulated, particularly with respect to manipulative or disruptive trading practices.
In light of recent reports of rampant “spoofing” and “wash trading” in some markets, the CFTC may be called upon to rule with an iron fist.
At the same time, the recent announcement that the U.S. Securities and Exchange Commission (SEC) will consider many (if not all) new currency offerings as “securities” portends a looming game of thrones for regulatory dominance in these markets.
The Westeros of digital currency trading
Currently, the CFTC is “beyond the wall” of the digital currency markets.
This is because, as a general matter, the CFTC regulates the trading of commodity derivatives (for example, wheat futures and options), not the trading of underlying commodities themselves (for example, wheat).
The CFTC has designated bitcoin and other virtual currencies as “commodities,” thereby removing them from the ordinary scope of what the the CFTC regulates. As readers may recall, the CFTC’s lack of oversight in this area, and the possibility of unregulated manipulation in the digital currency markets, was a key reason why the SEC recently denied a bid by investors Cameron and Tyler Winklevoss for approval of an exchange-traded bitcoin ETF…”
Full OpEd at CoinDesk