Disclosure was a big topic in the U.S. House of Representatives hearing on digital asset regulation on Thursday. Although House Agriculture Committee Subcommittee Chairman on Commodity Exchanges, Energy and Credit Sean Maloney specified that he would focus on gaps in the oversight and regulation of derivatives and the underlying spot markets, the discussion was wide-ranging.
The Committee on Agriculture oversees the Commodity Futures Trading Commission (CFTC), which regulates financial markets along with the Securities and Exchange Commission (SEC).
Chainalysis co-founder and chief strategy officer Jonathan Levin stated in a keynote that crypto transparency provides a unique insight into the markets, including their risks. Blockchain can unlock information about the entire network behind illegal activities.
Georgetown University law professor Christopher Brammer noted that disclosure law assumes that issuers have access to information that consumers do not have, while blockchain is transparent but difficult to understand.
“Disclosures should be read, not just stored,” Brammer said several times when speaking about consumer protection, adding that making disclosures more difficult could create vulnerabilities for consumers.
Input Output Global CEO Charles Hoskinson spoke about “thinking” and emphasized the importance of principles and the need to strive for “efficiency over rigor” in a rapidly evolving global marketplace. He later opined that currently no regulator is coping with Know Your Customer and anti-money laundering protections.
As attendees moved on to more specific issues, CFTC Market Oversight Director Vincent McGonagle said his agency has experience overseeing the cash market for cryptocurrencies. This market is now regulated by government money transfer laws, but there are many proposals to empower CFCs to manage it. State laws have a different purpose than the CFTC’s concern, McGonagle said, and centralized clearing adds a layer of consumer protection.
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According to McGonagle, digital assets are defined as commodities, but the SEC can determine if they are securities. Determining the point at which securities are fully decentralized and no longer subject to SEC oversight is a “tangled web,” McGonagle continued, and there is no legal mechanism to place these commodities back under CFTC oversight.
