CFTC Commissioner: Regulated cryptocurrency market could attract institutional investors

In a recent interview with BlockTV, the commissioner of the Commodities Futures Trading Commission [CFTC], Dan Berkowitz, shed light on a host of different issues that will impact the entry of institutional investors into the cryptocurrency market.

Berkovitz started the conversation by claiming that he is not “anti-crypto or anti-blockchain”. He added that the CFTC has an active enforcement division of around 170 people responsible for catching the “bad guys” in the space, hence prioritizing investor protection.

On the regulation of blockchain technology, he stated that the “emerging” technology was still nascent in its use. The CFTC’s regulations are quite flexible and not “prescriptive”, added the commissioner.

He said:

“We can accommodate new technologies, but, without knowing exactly what technology is and how the blockchain will be used and what the purpose is. We don’t have a definitive set of rules…so it’s an interactive process.”

Berkovitz added that the cryptocurrency and blockchain world may “take some time to develop” as it’s still in an early phase. However, he affirmed that “in the short term there may be uses for cryptocurrencies” and that in the longer term, blockchain would enter the fray.

On the topic of blockchain technology, he stated:

“Something like blockchain, if it realizes its potential, can save a lot of costs. There’s a really reliable, immutable, record of these transactions that we can access and it’s got a great potential to simply a lot of record keeping.”

He added that the CFTC is firmly behind blockchain and cryptocurrencies, but is approaching the situation with caution so that the necessary regulation can be put in place on time.

Speaking on the constant clash between the crypto-industry and the regulatory authorities, Berkovitz stated that there was no “conflict” between the two. Investor confidence and trust are boosted if the industry is under a regulatory “umbrella”, he said. It is pertinent that the right balance between market integrity, investor protection, market innovation, and cost compliance exists. He added,

“We’re finding, recently, that a lot of participants in the market want to be regulated. They don’t the be unregulated and viewed as rogue and somehow outside the system.”

Bakkt and ErisX, two notable cryptocurrency projects that aim to bring publicly traded Bitcoin into the market are awaiting approval from the CFTC for their respective proposals. In light of the same, Berkovitz stated that the CFTC had “several” proposals which were currently under a “review process”. He said,

“We need to ensure that a crypto-product, just like any other product, that gets traded on our market, meets all our standards and we are engaged very actively in that process.”

Bakkt has been pushed from the early part of 2019 to sometime later in the year, as stated by Jeff Sprecher, the CEO of the Intercontinental Exchange in February. Berkovitz, without revealing too much of the approval, stated that the CFTC is working with ICE and that this approval is a ‘priority’ for the agency.

With the influx of institutional investors into the cryptocurrency space, the commissioner stated that regulatory compliance is a must. He added that with the technology pushing into the mainstream and cryptocurrencies slowly becoming an asset class like equities and commodities, institutions will enter and will demand a strong regulatory atmosphere. He added,

“There is a definite market need to have the regulation of markets these institutional investors will invest in.”

He predicted that if a regulated cryptocurrency atmosphere is created, several corporations will venture into virtual currencies and blockchain technology. Berkovitz claimed that there were no significant frauds or market manipulations in the cryptocurrency industry in comparison to any new industry operating an unfamiliar technology.

Contrastingly, the Chairman of the SEC, Jay Clayton, stated last week that the regulatory agency was unsure about approving a publicly-traded Bitcoin product due to the nature of market manipulation and volatility of cryptocurrencies.

He ended his interview by stating that irrespective of a “crypto-winter” or a “crypto-spring”, the CFTC will maintain its long-term perspective on cryptocurrency and blockchain technology and will apply their regulation accordingly.

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