SEC AND CFTC SENATE HEARING: A CALL FOR MORE RESPONSIBLE AND TRANSPARENT PRACTICES
On February 6, 2018, the American Senate Committee on Banking, Housing, and Urban Affairs had hold an open session hearing, with the promising title “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.” The witnesses were the Chairman of the U.S Securities and Exchange Commission, Jay Clayton, and Christopher Giancarlo, Chairman of the U.S. Commodity Futures Trading Commission.
During the hearing, the two Chairmen of the most important regulating institutions of the American financial and trading markets, answered the questions of the members of the Senatorial Committee regarding cryptocurrencies and the role of regulatory institutions, like SEC and CFTC, in trying to intervene in the magmatic matters of what they define as “virtual currencies.”
The hearing was a most anticipated event, with fears of a heavy-handed approach towards cryptocurrencies and ICOs sprawling across the markets. Over the course of the hearing, instead, the two Chairmen struck a more optimistic and open tone than expected, over innovations in the financial sector, seemingly opening to what they consider as a healthy use of new technologies, in particular as a means to an alternative access to capital in funding new businesses.
In this sense, the SEC’s Chairman Jay Clayton pointed out that: “businesses without efficient access to traditional capital markets, can be aided by financial technology in raising capital to establish and finance their operations, thereby allowing them to be more competitive both domestically and globally. And these technological innovations can provide investors with new opportunities to offer support and capital to novel concepts and ideas.”
This kind of approach sounded refreshing to innovators like us at Elpis and seems a further recognition of efforts that are directed primarily at contributing in shaping a new financial landscape. Developing the technology-driven investing system we have created, that is based on AI and Machine Learning technologies, seems perfectly coherent with using “technological innovation” to create new opportunities to potential investors.
While the Chairman remarks on ICOs expressed a general concern about the opportunities for fraudsters and speculators to exploit the lack of transparency plaguing this newly created market, among those lines it is possible to detect a more open-minded take on ICOs as means to raise funds for FinTech startups. The need for a better, more transparent and clear use of ICOs cannot sound like scary or discouraging to any serious FinTech startup willing to give the potential bakers and token holders all the information they need to understand the nature and features of an Initial Coin Offering.
We already expressed the need for a more transparent and sustainable ICOs’ market, where ICOs are used with the clear purpose of raising funds to start and develop innovative projects. Moreover, those projects should be consistent and organic with the innovative fund raising process represented by an Initial Coin Offering: i.e. using innovative technologies to develop new investing systems and incorporating in the process all the regulatory procedures that can guarantee the potential bakers.
As said, the tone was more optimistic about the possibility for growth than generally expected, with the CFTC Chairman J. C. Giancarlo in particular expressing a genuine curiosity regarding the crypto world. The concern of SEC and CFTC seems keenly oriented to protect the “main street investor” from potential frauds and from the difficulties of navigating a newly created and unregulated market: “A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”
SEC’s Chairman J. Clayton used the platform to reinforce his previously expressed concern about the need for more responsible practices by all the players involved: “Market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.” A reminder that anti-money laundering and know-your-customer procedures can, and should, be applied by the operators themselves: there is no need to wait for the enforcement by the authorities to apply these best practices. In the case of Elpis, for example, for our offer we set in place KYC and AML best practices, clearly stating the project’s goals, milestones and framework, the team that is working on it, to give potential bakers all the information they need.
The general call for transparency that emerged from the U.S. Senate hearing needs to be answered from within with a collective effort. Or, rather: transparency and fairness should be ingrained in innovative investing startup projects, as they are characteristics inherent to these new technologies. The choice of developing investing systems based on technologies like AI and the blockchain must already constitute a way to take a stand in terms of transparency. Otherwise, why bothering in putting efforts and hard work in trying to shape a new way of investing?
Reducing cryptocurrencies, ICOs and technology-based investing systems, to some kind of just “other,” and maybe more sophisticated, speculative instruments, is both a way to undermine their potential and to waist the historic chance to give future investors the “new opportunities” that where recalled even by the American regulatory authorities. It will be like cheating again on the Main Street investors that seem to concern so much the SEC and CTFC.
Thus, from the hearing we can take a general sense that more work is awaiting the authorities in understanding and trying to deal with the systemic change that is on the way. On our side, as innovative operators, we cannot but take on ourselves the legitimate concern for a lack of transparency and fairness that emerged. And the responsibility to answer it with fair and transparent practices, a fair and transparent use of technologies.
In the final statement addressed to the Senate Committee, Chairman Clayton says: “Said simply, we should embrace the pursuit of technological advancement, as well as new and innovative techniques for capital raising, but not at the expense of the principles undermining our well-founded and proven approach to protecting investors and markets.” For rigorous FinTech startups like Elpis, that are envisioning more efficient, open and transparent investing markets, the words of SEC’s Chairman resonate as a call for all, gatekeepers and markets players, new and old, to contribute each within its own responsibilities and capabilities, to operate transparently and fairly for the greater good of the market and its main engine: the people who are willing to invest their money, fiat or crypto. They deserve our maximum efforts and beyond, they deserve to be given all the instruments to understand, evaluate and choose to whom trust with their investments.
If you want to join the investing revolution, check our Crypto-ICO at www.elpisinvestments.com, to know more about Elpis Investments.
Giuseppe Solinas
Chief Editor of Elpis Investments, The first AI Crypto-Assets Investment Fund: www.elpisinvestments.com, info@elpisinvestments.com
