CFTC & SEC TALK CRYPTOCURRENCY & BITCOIN U.S. Can't Do Anything To Stop Crypto



that is a very important work just from where a world of technology is located if you don't have a my plan you don't is it we have we have we have what I would say it's a combination of economists and technologists it's the question of you know here's what the technology is and doesn't make economic sense we have those people in our economics division deira and and we also have some of them enforced and they work together legend anymore yeah I'll take that as he is mr. chen carlo same question do you have the technologists that you're working together Thank You Senator Reid we've done a couple of things in 2017 to as Senator Brown said to get ahead of the curve we hire the agencies first ever chief innovation officer someone who comes with a deep background in a lot of these new financial technology innovations we also created something called lab C of T C which is our innovation hub and you asked where is it located it's actually located in New York City because so much of this innovation is taking place there we wanted to be close to these innovators to learn from them but but in terms of protecting consumers we also formed a virtual currency Enforcement Task Force there was actually that task force that recently brought three civil actions against Bitcoin fraudsters and and as I said in my testimony there's more to come and as to the resource questions we do need more resource I used by passeth aura t last year to put forward a budget request of 13 percent over our budget we had been flat funded for three years and we do need additional resources and built in those resources or additional resources for then tech generally and in cyber and cryptocurrencies specifically let me just elaborate a bit we continue to refer to Bitcoin that is just one cryptocurrency they seem to me and Olaf reading that every day there's a new variety of crypto Carson how not fortunate some of them based on the same Bitcoin technology or processes but just ensure expansion of these crypto currencies is an issue one – because my time is run I want other unrelated question of Jim Clayton is are you tracking all these different daily emerging currencies one and two is again it goes back to my sort of step back question is someone looking long-term at the systemic effects you know where are we going to be this is eerily reminiscent of the late 90s and derivatives which were nominally small parts of the market that were secure etc and then of course ten years later exploded so why don't you start with mr. Dean Karlan the Chairman and I'll finish up the turn but thank you very much so you're absolutely right bitcoin is one of many however of the many there's really you know a handful that I've gotten a significant traction and there and so that's important though for listeners to know because so many of these are fraudulent as you said we went after one it just mentioned it because I think it's interesting called my big coin which became known as my big con by people that were defrauded by it it was people that really were taking it was a Ponzi scheme they were taking consumers money and music to buy houses and and furniture and jewelry and we went after them and went after them my heart and we will continue to do that in terms of systemic risk right now this is still a relatively small market just by ratio but as you say we have to watch it and watch it carefully so as I mentioned the SEC doesn't have direct jurisdiction over that pure cryptocurrency but we have had to watch it because of course they're integrated with the markets that we do over some and your to your question of does 10 makes sense for 15 or 20 makes sense no I have a hard time getting my head around that because if it's an efficient is that sufficient medium of exchange 15 of them fluctuating different places probably doesn't make a lot of sense to me but you know that's that's right on the systemic but there's I don't agree with I agree with chairman Shekhar low but if people are getting ripped off that presents reputational risks that can have systemic effects we can go and wrap the questions money laundering evading etc but but just changing gears one second and I'll make a comment and then follow up with a written question there is some consideration arey heard of the SEC allowing in public offering the initial public offerings bars to suit I eat forced arbitration I think that would be a very bad idea and I'll make the argument and right I'm happy to address the question if but we're out of time on that right now so we'll have to do win right you you can we'll talk senator routes wait thank you mr. chairman gentlemen I'm just curious I I go back to where I learned with a pen and pencil to begin with as well and we did not have a quill at that time but we what we did have numbered to lead and as I get into this and learn more about this thing it's fascinating to see how quickly things are moving and yet everything that we talk about seems to translate back into dollars and cents yet that has not changed until now and suddenly we're talking about a new type of exchange and it sounds almost like bartering to me and it's a bartering in which could avoid the determination of a value in dollars and cents which brings up the question of how do you tax it if you need to how do you recognize income but also in this particular case I've I noticed both of you identified that you have additional or you have existing resources and regulatory oversight capabilities that you are utilizing today and while I question whether or not there are scenes that have to be filled it would appear that some basics that maybe a lot of us don't quite understand still have to be answered and I just want to just start out because I think mr. Clayton he started with this discussion with regard to the the the issue of whether or not you had control over Nico and the fact that if they were issuing in this particular case Bitcoin or the opportunity to market you had identified it as a stock or at least a value of something what is in this particular case that thread that you utilize once again and can you delve into a little bit more about how your agency responds to the regulatory mean in this particular case what is the specific item that you look at as being an item which is subject to your review a security in what the the definition of a security is broad and it includes I'm gonna I'm trying I'm gonna not use the technical terms there's Supreme Court cases and things but it includes when if you are offering the security or offering me something a coin and I give you money and the purpose of me giving you that money is to profit from your efforts going forward so if I give you if I give you money and you give me a coin and you say I'm gonna I'm gonna take the money and I'm gonna grow a business and that's gonna increase the value of that coin and by the way chairman Clayton you can trade it to somebody else so you may be able to get value for it tomorrow in fact you probably will get value for it tomorrow by now so you can get more value for it a few days that's a security so commodity wise if we're looking at trading commodities you would not have an interest in the subject of investigating or reviewing whether or not the trading of an Ag commodity don't was something and yet when we talked about the CFTC we're talking about a different story where commodities most certainly are an item of interest to you is Bitcoin or are these as currently being traded are they a commodity or are they a security or are they both what's so challenging about Bitcoin is it has characteristics of multiple different things one of the phrases that's often used is that Bitcoin is a medium of exchange a store of value or means of accounts with those three things have different connotations to them if it's a means of a medium of exchange then it's like a currency like instrument and yet as we've seen a number of means of exchanges haven't been closed a Bitcoin it was recently a Bitcoin conference that stopped accepting Bitcoin from registrants because they couldn't process the payments so but yet it's still spoken of as perhaps a means of account weight and in that case it has implications from the Fed and currency from our point of view when it's used as a store of value then it's very much like an asset like a commodity and in fact what we hear a lot of is people buying and holding if you go on to the Twitter universe you'll see a phrase H odl which means hold on for dear life and the thinking is is that they buy it and hold it in fact I mentioned in my opening remarks my 30 year old niece who bought Bitcoin years ago and she's an H OD L he says I'm gonna own it I don't know what's gonna come of it but I want to hang on to it and she said she's not a fraudster or manipulation she's just a kid and and believes in it and you know I was fascinated talking to her and I think she represents a lot of folks that think there's something in this I want to hold on to it and so in that regard it's a from our point of view it's a commodity and if there's a derivative on that we regulate it the problem is in the cash market we don't have Regulatory Authority means we can't set the standards but what we will do and we are doing is looking for fraud and manipulation and we have tend to be very aggressive if nothing else so that people like my niece can have some security that there's not fraudsters and manipulators out there and there are a lot too many far too many of them make mr. chairman source questions we do need more resource I used by passeth Ora tea last year to put forward a budget request of 13 percent over our budget we had been flat funded for three years and we do need additional resources and built in those resources or additional resources for then tech generally in cyber and and cryptocurrencies specifically let me just elaborate a bit we continue refer to Bitcoin that is just one cryptocurrency they seem to me and proliferating that every day there's a new variety of crypto Carson how now fortunately some of them based on the same Bitcoin to get ahead of the curve we hire the agency's first ever chief innovation officer someone who comes with a deep background in a lot of these new financial technology innovations we also created something called lab C of TC which is our innovation hub and you ask where is it located it's actually located in New York City because so much of this innovation is taking place there we wanted to be close to these innovators to learn from them but but in terms of protecting consumers we also formed a virtual currency Enforcement Task Force it was actually that task force that recently brought three civil actions against Bitcoin fraudsters and and as I said in my testimony there's more to come and as to the REIT and then of course ten years later exploded so why don't you start with mr. Carlin the Chairman and I'll finish up the show thank you very much so you're absolutely right bitcoin is one of many however of the many there's really you know a handful that I've gotten significant traction and there and so that's important though for listeners to know because so many of these are frauds with as you said we went after one it just mentioned it because I think it's interesting called my big coin which became known as my big con by people that were defrauded by it it was people that really were taking it was a Ponzi scheme they were taking that is a very important word just from where the technology is located if you don't have my plan you don't is it we have we have we have what I would say it's a combination of economists and technologists it's the question of you know here's what the technology is and does it make economic sense we have those people in our economics division deira and and we also have some of them enforced and they work together let see any more yeah I'll take that as he is this giancarlo same question do you have the technologies that you're working together Thank You Senator Reid we've done a couple of things in 2017 to as Senator Brown said technology or processes but just the share expansion of these cryptocurrency is an issue one and then two because my time is short like one other on slightly unrelated question of trim Clayton is are you tracking all these different daily emerging currencies one and two is again it goes back to my sort of step back question is someone looking long-term at the systemic effects you know where are we going to be this is eerily reminiscent of the late 90s and derivatives which were nominally small parts of the market that we're secure yet cetera

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