Speaking at Profit & Loss Forex Network New York, Mike Gill, chief of staff to US Commodity Futures Trading Commission (CFTC) chairman, Christopher Giancarlo, and the CFTC’s COO, provided a fascinating look at how attitudes towards cryptocurrencies have changed in Washington recently.
Gill revealed that the CFTC received significant criticism within the walls of government last year for its approach to cryptocurrencies, such as bitcoin, which the agency allowed two exchange groups to list futures on at the end of last year.
The reason for this criticism, he said, was concerns about money laundering and illicit activity linked to bitcoin and other cryptocurrencies.
“When the futures were poised to be listed, we were working with the exchanges to get some more comfort level with their listing and we were spending a lot of time suddenly being advocates for the space because we felt like if we said ‘no’ because we didn’t understand it, then we were just saying ‘no’ to everything, forever,” he said.
One argument that Gill said the CFTC presented to the US government is that it would be beneficial for the US to establish itself as the price discovery point for cryptocurrencies, and that to do this, regulation would be needed.
“This is what we said at the time: there’s more cotton made in China and there’s more cotton manufactured in China than anywhere else in the world, but the price is made in the US and so US cotton farmers have a huge advantage because they can just hedge their risk in dollars, whereas everyone else has to hedge the risk of their crop, but they also have to hedge their currency risk because they can’t [hedge the crop] unless they have dollars,” he said.
He continued: “So we explained to the government in discussions that if we say ‘no’ just because we don’t understand [cryptos] or we’re not fully comfortable with it, it will migrate at some point somewhere else and there’s a tremendous benefit to US companies and end-users having all these things priced in US dollars.”
Gill revealed that he also reminded the US Treasury Department that, rather than the CFTC, it in fact helped bitcoin go mainstream by selling it to the US public.
When the Department of Justice (DoJ) seizes illegal drugs, it destroys those drugs. By contrast, pointed out Gill, when the DoJ seized millions of dollars worth of bitcoin after it shut down Silk Road, the US Treasury subsequently sold those bitcoins back to the US public in a series of auctions held in 2014 and 2015.
But since last autumn, Gill said that there has been a distinct shift in the regulatory focus regarding cryptocurrencies.
“The larger discussions last fall were all about: is this going to disintermediate the US dollar? Will this allow people to avoid sanctions? There are currencies that were created to be like bitcoin, but truly anonymous instead of pseudo-anonymous, why exactly do you need that from a regulatory point of view?” he asked.
Now, Gill explained, the mood in Washington is more positive.
“At some point between the listing and mid-spring there was an acceptance and now they’re looking at this in terms of: what do we need to know about the space and what do we need to be worried about? As opposed to: can we stop it? Should we stop it?”