Treasury Secretary Steven Mnuchin is taking the lead on bringing together federal government agencies to coordinate regulation of cryptocurrencies, the chairmen of two financial regulatory commissions said Tuesday.
“The Treasury Secretary has been out in front on this. He’s formed a virtual currency working group of ourselves, the SEC, the Fed” and the Financial Crimes Enforcement Network, said J. Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission. He was speaking in response to a question at a hearing on cryptocurrencies held by the Senate Banking, Housing and Urban Affairs Committee.
Bitcoin has lost half its value this year after surging 2,000 percent in just 12 months to a record high above $19,000 in mid-December. Sales of new digital coins, called initial coin offerings or ICOs, have raised more than $4 billion in sales of new digital coins for projects based on the same blockchain technology behind bitcoin. However, critics say many of the projects barely exist beyond whitepapers, or are outright scams and both the SEC and CFTC have increased their crackdown on fraudulent schemes.
“We’ve had a number of preliminary conversations and workstreams developed,” Giancarlo said. “We are going to be coordinating our various responses. It’s begun with just some broad conversations just establishing our different jurisdictions so we’re all clear as to what we’re doing, and what we’re not doing, where the gaps are.”
Giancarlo added that he and Mnuchin have had a number of one-on-one conversations about virtual currencies.
Mnuchin said in a mid-January speech that the Treasury’s Financial Stability Oversight Council has formed a virtual currency working group, according to CoinDesk. Mnuchin has also said he wants to make sure that “bad people” cannot use bitcoin for illegal activities.
The Treasury did not immediately respond to a CNBC request for comment.
“We may be back with our friends from Treasury and our friends from the Fed to ask for additional legislation,” Jay Clayton, chairman of the U.S. Securities and Exchange Commission, said at Tuesday’s senate hearing.
In prepared remarks, Clayton said he and Giancarlo are open to exploring with Congress whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate.
Clayton said he is “not satisfied” when people think those platforms have the same protections as a stock exchange. “And I’m very unhappy that people are conducting ICOs like public offerings of stock when they should know that they should be following the private placement rules unless they’re registering with us.”
Initial coin offering enthusiasts have tried to distinguish between securities tokens and so-called utility tokens, which they claim would not fall under SEC regulation.
Tuesday’s hearing did not address recent reports about potential price manipulation a Bitfinex, a major cryptocurrency exchange. Bloomberg and The New York Times, each citing a source, have reported the CFTC subpoenaed Bitfinex and cryptocurrency company Tether in early December. The two companies share many of the same executives.
But the two chairmen emphasized how much resources they are devoting to monitoring cryptocurrencies. “We’ve never done as much work on consumer education as we have on virtual currency,” the CFTC’s Giancarlo said.