January 31, 2018 (The Fero Report) — The US Securities Exchange Commission has spearheaded a number of efforts to take down sketchy ICOs and cryptoscams like Bitconnect that tick every box in the manual of how to identify a ponzi scheme, but the head of the regulatory agency has signaled he wants to blunt the edges of what makes crypto as unique.
“We have brought cases [to court], and if people don’t change their ways we’re going to be bringing more cases,” SEC chief Jay Clayton told Bloomberg Wednesday.
“When an ordinary person loses 10, 15, 25 grand, that makes a material difference in their lives and that’s bad,” Clayton said, adding that “any time our markets are used like that we need to be paying attention.”
Clayton’s desire for investor protections makes sense from an empathy standpoint, but it belies the nature of the markets: where there is no risk, there is rarely a risk for substantial gains. One could just as easily argue that the $1,000 Erik Finman took from his bar mitzvah money and turned into more than a $1,000,000 made a “material” difference, too. Who is to decide that one person’s $10,000 loss matters more than another’s $1,000,000 gain?
That said, the SEC’s aggressiveness toward cryptoventures doesn’t mean Congress will need to write more laws regulating cryptocurrency. “There’s no doubt in my mind that our regulatory is not holding back the promise of this technology,” Clayton said in reference to distributed ledger technology, adding that, “in fact, it may be the other way around.”
Still, Clayton’s comments signal changes from the US regulator that has largely kept its hands off cryptocurrency over the past few years. As a member of the US Treasury Department’s Financial Stability, Clayton said he has been working with regulators around the US government and indeed the world. “I think that the level of understanding of the dangers in trading these instruments has increased substantially.”
Background: This week, news broke that Bitfinex and Tether, the company issuing the USDT coin that is pegged to $1 USD received subpoenas from the US Commodity Futures Trading Commission (CFTC) on December 6.
There is a major question looming around crypto about whether the dollars supposedly backing each tether actually exist. That question was supposed to be resolved after an auditor checked the company’s books. On January 27, Tether confirmed to CoinDesk that the relationship with the auditing firm had been “dissolved.” “Given the excruciatingly detailed procedures Friedman LLP was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame,” a Tether spokesman said.
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