Amid something of a flurry of ICO-related activity, the respective heads of the US Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CTFC) will be quizzed by senators next week.
February 6th will see the SEC’s Jay Clayton and CFTC’s J. Christopher Giancarlo appear as witnesses before the Senate Committee on Banking, Housing, and Urban Affairs, as part of a session dubbed Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission. The session, which will be streamed live online from 10am EST, should go a long way to establishing the two bodies’ policies towards cryptocurrency, and its growth around the world.
As we reported yesterday, the SEC has targeted AriseBank, among others, for what it sees as ‘fraudulent’ Initial Coin Offerings (ICOs) that were not registered with it, and thus not covered by its rules, regulations and assurances. Though no crypto-specific regulation is on its books, it considers many ICOs to be securities because – put simply – there is an investment of money with expectation of profit, that relies on the labour of others.
That definition stems from what is known in American law as the ‘Howey Test’. Its logic was stated in a recent filing by the SEC against The DAO (Decentralized Autonomous Organization), a now-defunct Ethereum-based provider of ‘Smart Contracts’ for venture capital investors, and appears to cut to the core of issues the Commission has with many similar ICOs.
There is also the matter of the thinly veiled (if at all) threat that regulators were looking closely at codifying their stances on cryptocurrency. That came from a recent Wall Street Journal (subscription required) op-ed penned in tandem by Clayton and Giancarlo, and – apart from stating regulatory issues – decried “many examples of form being elevated over substance” when it came to organisations soliciting investment in their crypto projects.