Former Commodity Futures Trading Commission (CFTC) chairman Jim Newsome on Thursday cautioned US regulators to be very careful in handling the cryptocurrency space regarding regulations or be left behind by the rest of the world.
Newsome, who has transitioned into an adviser to cryptocurrency developers, exchanges, and miners made the comments during the annual meeting of the Digital Chamber of Commerce, together with former SEC commissioner Paul Atkins. The two former government officials were supposed to present their report on best practices for cryptocurrency purchases and issuers, but Newsome said the project is delayed for two weeks because it is more complicated than initially thought.
At the same time, Newsome dismissed speculation of a cryptocurrency bubble as he pointed out that the industry is still too small and too immature as big-time allocators, such as institutional investors are still waiting on the sidelines due to the uncertainty in the regulatory atmosphere.
He also criticized the hardline stance of current SEC chairman Jay Clayton on the digital currency industry, “probably because he is getting word from the White House and Treasury Department.”
SEC pushing for crypto regulations
On Wednesday, the SEC issued a public statement calling for registration of cryptocurrency exchanges to continue their operations or if they want to start a digital currency trading company. News of the proposed rules sent Bitcoin and cryptocurrency prices tumbling.
The SEC statement reads:
“Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.
“Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges.”
However, while the SEC looks at cryptocurrencies as securities, therefore the need for tighter regulations, the CFTC considers the asset class as a commodity.
In a 20-page primer on digital currencies published in October last year, LabCFTC, a fintech initiative under the CFTC, presented its overview of the industry as well as its potential uses cases.
The report said:
"The CFTC looks beyond form and considers the actual substance and purpose of an activity when applying the federal commodities laws and CFTC regulations."
As more hard questions get asked and the sector sees new rounds of proposed regulation, the market is unwinding the gains, seeing Bitcoin drop again to below $9,000, dragging down most assets by 20% or more.