On January 24, 2018, US Securities and Exchange Commission (SEC) chairman Jay Clayton and Commodity Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo penned an op-ed in the Wall Street Journal. Their article comes on the heels of a joint statement issued by the enforcement directors of each agency.
"Distributed ledger technology, or DLT, is the advancement that underpins an array of new financial products, including cryptocurrencies and digital payment services," wrote the chairmen. "Many have identified DLT as the next great driver of economic efficiency. Some have even compared it to productivity-driving innovations such as the steam engine and personal computer."
The regulators are trying to walk the fine line between promoting FinTech entrepreneurship and maintaining orderly markets.
"In recent months we have seen a wide range of market participants, including retail investors, seeking to invest in DLT initiatives, including through cryptocurrencies and so-called ICOs, initial coin offerings. Experience tells us that while some market participants may make fortunes, the risks to all investors are high. Caution is merited."
Comparing the ICO boom to the dotcom bubble, the regulators warn that "only a fraction" of internet companies survived the market collapse of the early 2000s. "Fewer still provided their investors with life-changing returns."
Calling the embrace of new technology and contribution of development resources a "uniquely American characteristic," the chairmen write, "Our regulatory efforts should embrace [that characteristic]."
Clayton and Giancarlo note (as many others have before them) that cryptocurrencies "lack a fundamental characteristic of traditional currencies, namely sovereign backing." Many, it seems, are still bewildered by the willingness of cryptocurrency holders to place their trust in one another rather than in governments.
After explaining the CFTC's oversight of the cryptocurrency derivatives market and the SEC's overriding interest in regulating tokens that qualify as securities, the chairmen close on a hopeful remark.
"Distributed ledger technology may in fact be the next great disruptive and productivity-enhancing economic development," they write. "If history is any guide, DLT is likely to be followed by many more life-changing innovations. But we will not allow it or any other advancement to disrupt our commitment to fair and sound markets."
Both agencies are due to testify on cryptocurrency before the Senate Banking Committee next month.
Lastly, it's worth recognizing that cryptocurrency discussion using the Wall Street Journal as a platform is quickly becoming a pattern. In November 2017, market watchers voiced their concerns about the CFTC's approval of bitcoin futures products. And earlier, in October 2017, one cryptocurrency wallet project took out a full-page advertisement in the Journal to poke fun at bitcoin naysayer Jamie Dimon, the CEO of JPMorgan Chase.