The US Commodity Futures Trading Commission (CFTC) anticipates more applications from companies that are trying to become federally-regulated clearinghouses because of the “explosion of interest in cryptocurrencies.”
CFTC Chairman J. Christopher Giancarlo says companies such as LedgerX, a US-regulated Bitcoin derivatives exchange and clearinghouse that is monitored by the CFTC, are proliferating and becoming increasingly complex.
“The Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks.”
Testifying before the US House Agriculture Committee on Wednesday, Giancarlo said that technology is rapidly changing the markets and that the Commission has established four guiding principles to navigate the transformation.
- Adopting an “exponential growth mindset” that anticipates the rapid pace of technological innovation and the need for appropriate regulatory response;
- Becoming a “quantitative regulator” able to conduct independent market data analysis across different data sources, including decentralized blockchains and networks, without being reliant on self-regulatory organizations and market intermediaries;
- Embracing “market-based solutions” to determine the value of technological innovations, as we witnessed with the launch of crypto-asset-based futures products; and
- Establishing an internal FinTech Stakeholder to address the opportunities and challenges that FinTech presents and manage the ever-present tension between innovation and regulation.
Bitcoin (BTC), the leading cryptocurrency with a market cap of $97.4 billion, is also the most dominant, commanding 54.7% of the crypto market. It is currently up 2.35% to $5,511, at time of writing, after falling to a low of $5,181 within the past seven days.
As the CFTC anticipates a growing crypto ecosystem, a new survey commissioned by Fidelity Investments and conducted by Greenwich Associates finds that 47% of institutional investors believe digital assets have a place in their portfolio, while 22% already own digital assets. The survey, conducted between November 26, 2018 and February 8, 2019, includes responses from 441 institutional investors in the US.
Although Fidelity did not disclose the number of clients who are invested in crypto, Tom Jessop, president of Fidelity Digital Assets, says,
“We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional investors like family offices and endowments.”
Jessop debunks detractors, including billionaire Warren Buffet, JP Morgan Chase CEO Jamie Dimon and world-renowned economist Nouriel Roubini who have accused Bitcoin enthusiasts of being unsound, crazy or toxic. He says his clients are sound.
“Many of them are approaching it from a different perspective, whether it’s asset allocation, or others looking at the fundamentals like network activity, a more quantitative approach. It’s healthy people bringing different analytical lenses to the same subject.”
The investment giant, with $2.6 trillion assets under management, recently launched its cryptocurrency trading and custodial business, Fidelity Digital Asset Services.
Jessop says the crypto winter has had no negative impact on interest in the space. In an appearance last month on CNBC Jessop affirmed enthusiasm for the technology and the digital economy.
“In terms of our pipeline, prices really haven’t had an impact. If anything, they are as encouraged now as they were when prices were higher.”
Speaking at the DTCC Fintech 2019 conference in Manhattan on April 30, Martin Chavez, global co-head of the securities division at Goldman Sachs, says the technology underpinning cryptocurrencies is “super interesting.”
However, he suggests that a new government-backed currency may make the most sense in terms of embracing the digital economy.
“If we’re in the jurisdiction of the US and I owe you some money, and I give you one of these bills and you accept it, I’ve extinguished the debt, and it’s backed by the force of the sovereign. I wouldn’t forget that as I start thinking about digital currencies and somehow going around sovereign.”
Tuesday’s conference covered digital ledger technology platforms, robotics, artificial intelligence and crypto assets. Representatives from Bakkt, Fidelity, Amazon Web Services, MIT, LedgerX and State Street, among others, were in attendance.