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Coinbase exec: Regulators have 'sufficient authority' to oversee crypto, ICOs

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Coinbase exec: Regulators have 'sufficient authority' to oversee crypto, ICOs

The cryptocurrency industry has all the regulators it needs, according to one major industry executive.

"Federal regulators already have sufficient authority to oversee this space effectively," Mike Lempres, chief legal and risk officer at Coinbase Inc., told lawmakers at a House subcommittee hearing. Coinbase is subject to several federal regulators, including the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes Enforcement Network, he said.

Many witnesses and Congressional attendees at the March 14 hearing said guidance on the regulation of initial coin offerings — offerings where companies sell digital tokens to raise capital — would benefit the industry.

Lempres noted that Coinbase, one of the world's largest virtual currency exchanges, does not support any ICOs because the company is "not sure" about how they are regulated. The exchange currently supports just four of the more than 1,400 tokens available: bitcoin, Ethereum's ether token, litecoin and bitcoin cash.

"We are waiting for the dust to settle between the CFTC and the SEC before we actively engage in supporting ICOs," Lempres said at the hearing. "Once the rules are clear, we'll move in."

The hearing comes as regulators around the world grapple with how to handle this emerging industry.

Thailand's Securities and Exchange Commission recently announced that it plans to introduce regulatory framework to supervise ICOs and cryptocurrencies in March. The European Securities and Markets Authority, meanwhile, has warned that ICOs are quite risky, saying that they are highly speculative and vulnerable to fraud or illicit activities.

The U.S. SEC has taken numerous actions against potentially fraudulent offerings or ones that constitute unregistered securities offers and sales.

Rep. Bill Huizenga, R-Mich., said it is "still undetermined" if there needs to be any kind of legislative role related to regulation of the cryptocurrency industry. The hearing, which Huizenga led, was the committee's first formal hearing to educate members on the issues surrounding cryptocurrencies and ICOs, the lawmaker said in an interview.

Members of congress at the hearing shared differing views about the entire cryptocurrency industry. Rep. Brad Sherman, D-Calif., argued that cryptocurrencies should be treated as a scam, and questioned the need for them at all when the U.S. has a strong financial system built around fiat currencies.

Rep. Tom Emmer, R-Minn., said he disagrees with some of his colleagues.

"I respectfully disagree with the idea that [additional regulation] won't act as a wet blanket on this amazing new technology," he said of the underlying blockchain technology.

Robert Rosenblum, a partner at Wilson Sonsini Goodrich & Rosati and head of its cryptocurrency and blockchain practice, proposed that Congress authorize the SEC to modify and amend their rules to help ICO issuers to comply with securities laws. Current rules and regulations are "not geared toward" ICOs and tokens.

Huizenga said the SEC and the CFTC are still trying to hash out their exact roles in regulating the industry. The lawmaker said federal legislation in the space is still "open for review."

"At this point, we don't have a draft form of a bill," Huizenga said. "We're not saying that that won't necessarily be coming, I'm just not sure we're quite there yet."