As you may well be aware, the crypto market has been on a bit of a dive the last week or so. There were many theories, news reports and a lot of FUD! However earlier this week the US Senate Committee on Banking, Housing and Urban Affairs met to discuss “Virtual Currencies: the Oversight Role of SEC and CFTC”. Giving testimony was the Chairman of the Securities and Exchange Commission(SEC), Jay Clayton and Christopher Giancarlo the chairman of the Commodity Futures Trading Commission.
Before the hearing there was a lot of talk of what would these two regulators say about crypto’s and would it be positive or negative? In short, what was discussed was quite positive! There was no mention of making crypto currencies illegal or banning ICO’s.
Instead, what was said, was that as regulators “Our task, as market regulators, is to set and enforce rules that foster innovation while promoting market integrity and confidence.” This is a key point and highlights the key function of regulators. As much as we may not like them, or may not want them in the crypto space, they will be vital for the growth of the market and legitimising it in its current state.
The purpose of the regulator is to protect the retail investor i.e. me and you, the man on the street. Throughout the hearing this was repeatedly highlighted as a concern by both witnesses with particular emphasis on this when it came to investing in an ICO and crypto scams. They sighted instances where the SEC had shut down ICO’s because they felt they were scams and that the ICO was setup to steal money from unsuspecting retail investors.
The regulator will play a key role in the growth of the crypto market. The reason for this is that the biggest growth will happen once institutional investors and pension funds start investing in crypto. However, without regulation that simply will not happen. To give some slight perspective to this, the crypto market cap (as of writing this) is circa US$375billion as per coinmarketcap.com. The pension market has assets which totalled US$41.3trillion in 2017. This means that 1% of the pension market, US$413billion, is larger than the current size of the total crypto market.
For any of this money to flow to the crypto market we need regulation. Pensions are one of the most regulated financial products out there. Additionally, with all the focus on pension advice, specifically here in the UK, for any pension fund manager to invest in crypto, they will want to know exactly where they stand regarding regulation to ensure no laws are being broken and if things go wrong, they are still protected by their regulators.
You might be thinking, what does a US Senate committee meeting have to do with the UK and for that matter the rest of the world? Earlier this year the World Economic forum met in Davos. This is a gathering of world leaders, economist, business men and woman. One of the topics discussed was Bitcoin and crypto currencies.
The point I am trying to make is that this is a global market and the technology is a global phenomenon. It is highly unlikely that if the USA take the positive stance of encouraging technological development whilst clamping down on scams, that other countries around the world will not follow this example in some way or another. If they decide to make it illegal or ban it, they risk being left behind technologically and potentially financially as well. We all know that no one wants to be left behind…
There are many other interesting points and comments that where raised during the hearing and I could write a lot more about this hearing. As such I suggest having a listen to the hearing. Get involved and start to learn about all the things that impact this market as there is something much bigger happening here than people making money. The term HODL was even used during the hearing!!
Interested to hear and see your thoughts and comments below.
These are links for some of the information/facts I refer to:
Crypto Market information: https://coinmarketcap.com/
Pension Fund info: https://uk.reuters.com/article/uk-global-funds-pension-assets/global-pension-fund-assets-hit-record-41-3-trillion-in-2017-study-idUKKBN1FP0X6
Senate Hearing video and documentation: https://www.banking.senate.gov/public/index.cfm/hearings?ID=D8EC44B1-F141-4778-A042-584E0F3B9D39