Washington’s “septuagenarian leadership” has slowed effective regulation of cryptocurrency and decentralized finance, Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), said at a conference today (July 28).
Giancarlo argued that existing securities laws (and others) are sufficient to regulate the cryptocurrency industry, which has undergone tremendous turmoil this year. But the regulatory process has stalled in recent years, he said, because the responsible authorities are too old to understand the technology.
“It’s a new architecture of money,” he said. “The new generation gets it.”
The conference was held at the New York Stock Exchange, and presented by Solidus Labs, a firm that monitors risks in the crypto market.
Conference participants generally agreed that the world of cryptocurrency and decentralized finance needs to be regulated. They also agreed that these burgeoning sectors pose distinct threats to the overall economy, but compared the situation to the fallout from the collapse of Long Term Capital Management in 1998 and the bursting of the dot-com bubble in early 2000. However antiquated the existing regulatory system may be be, they claimed, it managed to limit the damage.
“It’s about a failure of risk management,” said CFTC Commissioner Caroline Pham, referring to both recent turbulence in the crypto market and past disruptions.
The conference’s speakers also agreed that Congress has a crucial role to play, and this is where the criticism of “septuagenarian leadership” came in. Pham emphatically said it’s up to Congress, not regulators, to set the rules, but if it fails to do so — for political or generational reasons — it’s marketplace innovation that will suffer.
A key area in this category is jurisdiction: there are several government agencies with likely reign over the crypto/defi realm, including the CFTC and the Securities and Exchange Commission (SEC). Giancarlo offered a schematic distinction: The SEC oversees entities involved in capital formation — stocks, bonds — while the CFTC is involved in risk transfer. The CFTC, he said, does not regulate how wheat, for example, is bought or sold, but it does regulate wheat futures markets.
However, as useful as that scheme can be, how it can be applied to cryptocurrencies is unproven. There are thousands of coins, and as the US government claimed earlier this month, to Coinbase’s dismay, some of them may be securities and others may not.
