Leading Government Officials Support More Regulation of Burgeoning Virtual Currency Marketplace, Writes Corporate Securities Attorney Laura Anthony

Corporate Securities Attorney Laura Anthony agrees with recent Congressional testimony by two key U.S. finance officials: at some point, the cryptocurrency market will need stricter regulation, and until that time, investors are encouraged to tread with due diligence in trades or investments that involve virtual currencies.

Writing in the Securities Law Blog, Ms. Anthony, founder of Legal and Compliance, LLC, in West Palm Beach, again tackles the emerging challenges around Bitcoin and other virtual currencies in light of a recent hearing on the topic before the U.S. Senate Committing on Banking, Housing and Urban Affairs.

Both Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), and J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), addressed the hearing about the rise and impact of virtual currencies.

“It is becoming increasingly certain that the U.S. will impose a new regulatory regime over those tokens than are not a true cryptocurrency,” especially those used to raise capital, according to Ms. Anthony.

She notes that virtual tokens now positioned as equity currently fall under SEC jurisdiction and state oversight, while those used to raise capital for securities offerings or that later turn into commodities fall under SEC and CFTC oversight.

But Ms. Anthony agrees with the officials’ testimony that state-by-state regulation of some virtual currency transactions need both strengthening and consistency, and she supports the SEC-CFTC “united front” marked by virtual currency task forces, information sharing, public education efforts and cooperation with other federal and state bureaus and agencies.

Most experts tend to agree that cryptocurrencies like Bitcoin–and especially the disruptive blockchain (or distributed ledger (DL)) process that powers it–have the potential to change capital markets, creating what Giancarlo describes as a “broad and lasting impact on global financial markets in payments, banking, securities settlement, title recording, cybersecurity, and trade reporting and analysis.

Ms. Anthony points that that “regulation and oversight need to be fashioned that properly address the new technology and business operations,” including custody, liquidation, valuation, cybersecurity at all levels, governance, clearing and settlement, and anti-money laundering and know-your customer matters.

“I am always an advocate of federal oversight of capital market matters that cross state lines,” she writes. “A state-by-state approach is always inconsistent, expensive and inefficient for market participants. Both agencies are clear that regardless of the technology and nomenclature, they are and will continue to actively pursue cases of fraud and misconduct.”