In an interview with columnist Andrew Ross Sorkin of the Times Talk on 29 November, the Chairman of the US Securities and Exchange Commission (SEC) Jay Clayton has expressed an unyielding stance towards the perceptions of the cryptocurrency markets. Clayton emphasized the lack of safeguards in this emerging market structure – hence his skepticism, however, he was for a balance that involved protecting the interests of investors.
The interview lasted for about an hour, and few minutes into the interview, when Andrew asked Sorkin where he has landed with the whole regulation process, Clayton responded saying:
“There are two rule sets for the securities market, one for the offering and sale of securities, and the other for the trading of securities. Our rules have stood the test of time very well and we should not change them to adapt to technology. Technology ought to be able to fit within our rules”.
Despite his view of the technology as having “promise for adding efficiency to our [capital] marketplace”, he is worried about the investors’ protection aspects of the rules currently governing the capital markets being not readily applicable to the cryptocurrency market.
In explaining the difference between a currency and a commodity, Clayton made it clear that Bitcoin is considered a currency because it’s widely distributed and its distribution was not controlled by a single entity. It’s used as a medium of exchange, and you’re not looking to the efforts of others to increase your return. In the case of a commodity, they generally have a use other than a medium of exchange, which he inferred Bitcoin had none.
A baffling response emerged from Clayton when he was asked in line with Managing Director and Chairwoman of the International Monetary Fund Christine Lagarde’s public opinion of cryptocurrencies in the future as being backed by governments and whether current token offerings would then be validated or will be phased out due to a regulated version. Clayton responded, “we’ll see.”
During the discussion, Clayton revealed to Sorkin how the agency had been trying so hard to educate investors on the dangers of investing in the cryptocurrency and similar markets. He essentially maintained that there are risks involved when participating in such investments. Clayton said:
“We tried to get the word out that although the trading looks like the trading you would see on Nasdaq or on the New York Stock Exchange, these markets do not have the same kinds of safeguards for you. We’ve worked for […] seventy years to try to prevent manipulation in those [traditional] markets, to try and prevent people from taking advantage of the small player.”
In the long-term, Clayton’s view on a regulated cryptocurrency market will hinge on the permanent use case, but right now, he perceives this is currently unclear as there are lots of successes and failures as with any new emerging technology.
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