Idaho Republican Sen. Michael Crapo and Ohio Democrat Sen. Sherrod Brown will hold a full Senate Banking Committee hearing on Tuesday at 15:00 UST to explore the regulatory framework for cryptocurrency.

As the price of Bitcoin and other cryptocurrencies rose last year, investors flocked to the largely unregulated assets. In December last year, Bitcoin hit an all-time high of around $20,000 but has since fallen to $6,644 according to Coinmatketcap. US congressional leaders hope to better understand how to understand cryptocurrency — and who should regulate it.

Chairmen of two Key US regulatory agencies will present a framework for virtual currency. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), will testify to the Senate Banking Committee on how to address the growing global influence of cryptocurrency.

Balance of interests

According to testimony published on Monday, Giancarlo and Clayton advocate for maintaining orderly markets and to find a balance of interests. Giancarlo writes that “a proper balance of sound policy, regulatory oversight, and private sector innovation will allow American markets to evolve in responsible ways.” He goes on to claim that technological innovation will “grow our economy and increase prosperity.”

Reuters reports that the hearing will be a fact-finding exercise to clarify the powers of the SEC and CFTC to regulate cryptocurrency exchanges, and how the agencies can protect investors from fraud.

Giancarlo and Clayton will use the hearing to showcase the efforts their agencies’ have made to police the market and to highlight limitations in the regulatory structure.

ICOs beware

Just which regulatory agency should oversee cryptocurrency is unclear. A patchwork of overlapping state and federal agencies place the asset class in a legal grey area. In his prepared remarks, Giancarlo said:

Virtual currencies … likely require more attentive regulatory oversight in key areas, especially to the extent that retail investors are attracted to this space.

ICOs are also likely to come under greater scrutiny, the SEC has already deemed tokens as securities subject to federal securities laws.

Both the SEC and the CFTC have gone after unscrupulous ICOs and investment schemes. Tether and Bitfinex received a subpoena from the CFTC in December 2017, though the contents are unclear.

We are open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate.

Nevertheless, the regulators expressed that they would not like to crush development of blockchain technology and are likely to explore how regulators can strike a balance between investor protection and innovation.

We’ll keep you updated on the hearing.