On Tuesday morning at 10 a.m. ET, the Senate Banking Committee will hear testimony from the top two U.S. financial regulators on the opportunities, challenges, and dangers of bitcoin and other cryptocurrencies. Here’s what you need to know:
Why is the hearing happening now?
The past 14 months have been a volatile time for bitcoin valuation. The virtual currency increased in value by more than 1,300% last year to a December high of $20,000. But the valuation has fallen to less than half that on some exchanges in 2018. That level of volatility has spooked lawmakers and banks, some of which have banned customers from using their credit cards to buy bitcoin. Amid the uncertainty, Congress wants a better understanding of how bitcoin will fit into the existing landscape of financial regulation in the United States, and what more needs to be done to protect consumers.
Who will be testifying?
The chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, and the chairman of the Securities and Exchange Commission (SEC), Jay Clayton, will testify before the Senate Banking Committee. Together, they and their organizations bear the lion’s share of responsibility for protecting American investors and ensuring efficient markets. They are expected to highlight the danger that bitcoin and other cryptocurrencies present in terms of volatility, fraud, and vulnerability to cyber theft. They’ll also discuss their agencies’ efforts to regulate virtual currencies, and ask for more power to regulate them.
Why does it matter?
If granted, regulatory oversight of cryptocurrencies by the CFTC and SEC could provide the foundation for cryptocurrency exchange traded funds (ETFs). Several financiers have tried to gain approval for these new instruments, but have so far been unsuccessful in the U.S. (an exchange traded note or ETN is available to investors in Europe). In at least one instance, the SEC cited a lack of regulation as the basis for rejecting an application for a cryptocurrency ETF, so an expansion of its regulatory authority could lead to a flourishing of such vehicles.
Still, Giancarlo and Clayton, appointees of President Donald Trump who have been tasked with reducing regulation, will be hard pressed to walk the fine line between asking for more regulatory authority without expanding regulatory bureaucracy.