Disclosure was a big topic during a U.S. House of Representatives hearing on digital asset regulation on Thursday. Although the chairman of the House Agriculture Committee’s subcommittee on commodity exchanges, energy and credit, Sean Maloney, clarified that he would focus on deficiencies in the supervision and regulation of derivatives and underlying cash markets, the discussion was very varied.
The Agriculture Committee 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 said in his testimony that cryptocurrency transparency provides unique insights into the markets, including their risks. Blockchain can unlock network-wide information behind illicit activities.
Christopher Brummer, a law professor at Georgetown University, pointed out that disclosure law assumes issuers have access to information that consumers don’t, while blockchain is transparent but difficult to understand.
“Disclosures should be read, not just filed,” Brummer has repeatedly said in reference to consumer protection, adding that the increased complexity of disclosure could create vulnerabilities for consumers.
Input Output’s Global CEO Charles Hoskinson spoke about ‘mindset’ and stressed the importance of principles and the need to seek ‘efficiency over rigor’ in a changing global marketplace fast. He went on to express the opinion that no regulator is doing a good job with Know Your Customer / Anti-Money Laundering safeguards yet.
As attendees moved on to more specific questions, CFTC Market Surveillance Division Director Vincent McGonagle said his agency has the expertise to oversee the crypto spot market. This market is now regulated by state money transmission laws, but there are many proposals to grant the CFC authority over it. State laws serve a different purpose than the CFTC’s concerns, McGonagle said, and centralized clearing adds a layer of consumer protection.
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Digital assets are defined as commodities, McGonagle said, but the SEC can determine when it comes to 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 transfer such products to CFTC oversight.