SEC Chairman Jay Clayton On Cryptocurrencies And Investing



Sandler O'Neal global exchange conference ahead of all the exchanges talking about what's going on in market structure in trading special guests right now Jake late and the chairman of this sec exclusively on CNBC just want to get that little plug in for us thanks for joining us you had a very interesting discussion here with all the members here talked about a sense of responsibility to protect investors are there areas of investing that you're concerned about now where you feel investors are being taken advantage of or there's some areas you feel the SEC needs to to act on well about that thanks and thanks for being here look we are always good we're always concerned that there are areas where investors are being exploited paying too much being defrauded that's our job and we're looking for we're looking for that everywhere whether it's old frauds pump-and-dump in that you know in the penny stock area or some of the frauds we're seeing in today's ico market every every woman and man at the SEC comes to work every day thinking about our Main Street investors and how to protect them you brought up icos i mean go to this area of interest in bitcoin is off the charts by our viewers not since not since the 2000 area have I seen such interesting tell us a little bit more about what you're planning to doing with Bitcoin cryptocurrencies and blockchain this year let you brought up by cos I talk to my I co the friends people who are interested in this and they say we're stymied we don't know what the SEC is planning to do can you tell us whether I cos are definitely securities or are you going to carve out some exceptions or and when are you going to make a clear ruling decision on this okay so there's a there's a lot in that area let me start with the technology distributed ledger technology incredible promise it can it can drive efficiencies not only in the financial markets but in a lot of markets fine to areas in the financial markets where distributed ledger technology has come to the fore cryptocurrencies these are replacements for sovereign currencies replace the dollar the yen the euro with Bitcoin that type of currency is not a security let me turn to what's a security a token a digital asset where I give you my money and you go off and make a venture you have some company you want to start or something you want and in return for me giving you my money you say you know what I'm gonna give you a return or you can get a return in the secondary market by selling your token to somebody that is a security and we regulate that we regulate the offering of that security and we regulate the trading of that security and that that's our job and we've been doing it for a long time so you're saying the classic definition of security you invest in a common enterprise with an expectation of profit you're saying the way you look at most I cos they are securities correct are you planning now to make a clear statement on that because there seems to be a lot of confusion about whether anybody is going to get approved or not Bob I hope I just did if it's a security we're regulating it and let me just we've been doing this for a long time and we've built a 19 trillion dollar economy a securities market that's the envy of the world following these rules if you have an IC o—- or a stock and you want to sell it in a private placement follow the private placement rules there's no secondary trading you know you have to do that if you want to if you want to do an IPO with a token come see us file financial statements file disclosure take the responsibility our laws require and we're happy to help you do that public offering you seem to be saying that the SEC is not going to be changing the definition of a security just to suit the ico communities I'm right I'm certainly not going to support that okay let me move on what about altcoins we have discussed Bitcoin but there are other gold coins out there there is ether for example there is ripple art art is ether a security Joe Bob I'm not going to comment on specific crypto assets and whether they security are not as security but you you captured the definition very well no am i giving you my money for you to go off in a venture where I'm relying on your efforts and the efforts of your college but there are you understand there are lawsuits I'm sure you know right now for example of a ripple about whether it is or is not actually a security there's party partly one of the issues here and obviously about how the SEC feels it's very important we we are not going to do any violence to the traditional definition of a security which has worked well for a long time and I believe will continue to work well is it possible the SEC might say these were securities at one time and no longer are because they're not centrally controlled for example look that's that's a that's a question that is out there and you know will be answered in the specific facts and circumstances but we've been doing this a long time and there's no need to change our fundamental approach let me move on Bitcoin etf's a lot of people chomping out the bits I covered ETS for a long time a lot of issuers are waiting what criteria do you need to start a Bitcoin ETF we now have a very woman fairly well developed futures Bitcoin market that's been out six months now are you pleased with how that is going is is the development of that market sufficient to allow Bitcoin ETFs or are there other criteria so Bob our our Division of Investment Management has put out and been very clear with the industry about the types of things that we're going to need in any asset class if we're going to approve a product and one of those things one of those things is you know is the pricing something that people can rely on also asset verification and our our communication to the marketplace on this has been very clear I'm very pleased with my colleagues at the SEC because I think we're very open about what we need for you to satisfy our readers well you sent the loan letter out a few months ago that was widely quoted of the industry that contained an awful lot of question marks implying you have a hot very high hurdle to overcome you who want a bitcoin ets to satisfy us at the SEC expand on that those hurdles are the hurdles that we think and Main Street investor expects if they're going to invest in a product yeah I understand that there's a great deal of discussion about these crypto assets but again we're not gonna we're not gonna relax our rules based on the level of discussion we need to know that the pricing is certain we need to know that the assets are there we need to know that it's going to function as our retail investors would expect those products to function I would note that you've just recently appointed a Crip those are my my apologies to Valerie but that's what she's going to be called from now on is that a sign that you're taking this very seriously and you're looking for ways to advance the the blockchain slash of a Bitcoin medium and that you're not going to be obstructionists and interested in basically shutting it down because that's what my Bitcoin friends ask me dude do not take my comments as comments that you know we're not paying attention we're spending a great deal of time in this area I think blockchain technology has tremendous promise for the securities industry eliminating costs I mean the cost of verification in the securities industry incredibly high we can if we can make that more efficient terrific and in terms of Val she has a she has a very important job we have an enforcement division we have an investment demand management division that you talked about we have a trading division and we have corporation finance her job is to make sure that we're coordinated on this new asset class across all those divisions and I and I thank her for taking it on let me move on volatility hit the roof in February several exchange-traded products and volatility space essentially blew up are you satisfied that leverage and inverse ETFs and volatility products don't constitute any kind of systemic risk to the system so let me take a step back and speak generally I am always on the lookout for risks that we don't recognize or risks that we have Mis assessed you know whether it's in a product space or another space I'm not going to comment on specific products but I come to work everyday asking our staff are there pockets of risk that we're not recognizing or that when we look at them we're way under estimating and leverage as you and I both know you know leverage that you don't see or leverage that's excessive has been a hallmark of problems for a long time one of the areas that we spend a lot of time on is IPOs I've been covering them for twenty years it's been very depressing to see the IPO market slowly go down I think the IPO markets 50 percent lower than it was 20 years ago there's thirty four hundred companies in the Wilshire 5000 that is a disgraceful number you can serve that's a 10 d5 violation you you have been very passionate about how to change that give us some insight into what we can do to get more companies to go public so I am passionate about it because if this is our if this is our total equity investment space the private the private part of it used to be this size it's probably now this size so half of our equity investment space is now private which means it's away from our Main Street investors I don't like that as just as a result as a general policy matter because we're shrinking the opportunities for our Main Street investors there are a lot of drivers of it we're looking at those drivers you know some point to regulation some point to the availability of private capital some point to secondary trading it's probably all of those but but like you Bob I would like to see the suite of opportunities for our Main Street investors be very broad let me move on I'm gonna hit you with several questions on different topics right now cyber security you've been increasing efforts recently to monitor cyber crimes can you tell us what you're doing to stay on top of this cyber so cyber crimes come in many forms some of them are old frauds that we know about just cyber-enabled some of them are new we formed a cyber group in our Enforcement Division these are people who have expertise in the dark web expertise and understanding hacking you know hacking taking information using it to trade on this is an area we're focused on I don't want to give away too many of our investigative secrets but we have we have people beefing up the department that handles this I mean obviously this is a major issue we had issues about how how timely companies need to be in reporting cyber violations for example are you going to give more careful guidance on when companies are required to tell us about when they've had breaches so in in the area of disclosure we did come out recently with guidance for public companies on how to how to look at a cyber incident and how to assess whether disclosure should be made I've said generally since I started in this job that the level of disclosure in the market both as a general matter about cyber risk and of specific incidents is not where I would like to see it I think it's been improving I think the public has a better sense of how cyber dependent we are and therefore the level of cyber risk but I'd like to see more I move on to talk about the Bob bond market there was a equity market committee to look into the equity structure market structure of the stock market that was under your predecessor you have a new committee to look into the bond market structure one of the that's amazing to me watching this for so many years is while stocks have essentially moved to an electronic trading model the bond market has not there are efforts to do so and it's moving but it's very slow but you know most of this is done over-the-counter what would you like to see changed in the way bonds are traded and how it might impact investors well let me say this I don't I don't think it's for me to decide what I would like to see but what we are seeing is increased electronification and our job is as trading changes to make sure that trading is efficient that it's transparent and then our markets are resilient and we formed the the fem sac the fixed income market structure Advisory Committee because as this electronification is coming to the fixed income market we want to make sure that our regulations are keeping up with it and that we're getting those results great and we and we did this in the equity market I mean today is equity market is much more efficient than the equity market of twenty years ago there is there room for improvement there always is and we're looking at it but I want to make sure the same thing happens in the bond market let me go to the stock market because this is an issue we debate here at CMU see all the time and that relates to the fragmentation of the markets about 40 percent of the trading in stocks today are done in dark pools where as you know there are restrictions of course they're not basically making bidding offers and not clearly available some people have railed against this saying the markets become too fragmented too difficult to operate in what's your viewpoint on that let me take a step back my viewpoint on the equity market is we have to understand that there's a lot of different aspects of the equity market the large cap stocks trade much differently from the mid-cap and small-cap stocks so a conclusion like that one about you know we're trading takes place and whether it's efficient or not may be different for a large cap stock versus a medium cap or small cap stock we are looking at those issues and assessing whether our rules including our rules for alternative trading systems accommodate both large cap and small cap stocks I gotta let you go but before I do are you convinced that investor the average investor buying stocks on a regular basis today are getting a better deal a fairer deal a more transparent deal than they were getting save 40 years ago yes I'm convinced to that but it's our job to see if we can get them a better deal okay J Clayton chairman of the SEC thanks so much for joining us again Franklin on live television or to think about that J Clayton head of the SEC hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up-to-date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

27 thoughts on “SEC Chairman Jay Clayton On Cryptocurrencies And Investing”

  1. This guy is totally a joke, I work in regulatory environment and in public accounting. I don't understand how Trump could nominate this guy. He is no pro business, you get nothing from this guy. He does do nothing and call it regulation ! Is it a security or not? He does not now and just refers to old same rules. It is not his job to decide if investors should invest in crypto or not. He should be objective and establish rules for crypto currencies as a new class and be specific what rules apply. Bitcoin is since ten years on the market, there is no regulation? come on !
    I wish I had his job and get money for doing nothing… and talking to the public "we regulate, we regulate, be afraid of us" but do nothing.

  2. Innovators are not asking you to relax rules we asking you to explain yourself with clear guidelines that issuers need. Get off your high horse because the people who build the innovation in the US you claim your responsible for did it in exempt transactions and exempt securities that need a bright line or wait for the SEC to pull the rug out from under them and claim fraud. Get real you the king of late action to recognize area you don't regulate. Quite Frankly, your financial system just stole 20 trillion dollars from consumers indirectly so wake up people.

  3. Does the SEC have jurisdiction over ICOs outside of USA? Is it just the ICO itself or the token after the ICO is finished?

  4. Jay answers just like a classic politician. It's an unfortunate time for blockchain tech startups in the USA. They'll definitely fall behind on this compared to other nations, especially those in Asia.

  5. Wallst bribe the senat → senat confirm Elad Roisman (pro-crypto guy) as SEC commisioner → SEC will approve all ETFs → Bakkt and NASDAQ will open

  6. You are concerned only for the interest of the financial system ! When are you going to jail the manipulators of Gold and Silver markets ?

  7. There is an investment apartheid in the US between "accredited investors" who can do whatever they want with their money, no strings attached, and the other 98% of Americans who can only invest into the big corporations who can afford to pay millions of dollars in compliance and lawyer fees to be traded on the public markets. It's a shame and a sham. As if someone having a million dollars suddenly turns you into an investing guru who could not possible lose all or most of their money the same as regular Joe. It is meant to keep the majority of American's stable and poor enough to continue to be exploited for their labor to those who can invest their money in high-reward opportunities….

  8. Notice SEC guy cringes after interviewer says "Ripple." cause he knows he is going to hurt Mary Jo and her friends when they deem XRP a security. Even the CNBC reporter has not made the distinction between Ripple the company, and XRP the token…not a good sign.

  9. Can Jay Clayton say anything besides we've been doing this for a long time and we're not going to change anything like the saying racing the easiest thing to change is a seat belts in other words Jay hit the road

  10. Be sure to watch Glenn Beck and Teeka Tiwari expose the crypto conspiracy it is real and is going on right now. BIG companies driving down the price and buying all they can right now! You should be too. #CryptoCowboy – because it's like the Wild, Wild West out here! 🙂

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  12. "Do you have anything to say at all other then how long the SEC has existed?"
    "Weve been doing this a long time."
    Wow what a useless video

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