With major banks blocking customers from buying Bitcoin with credit cards and governments cracking down on cryptocurrencies, a Senate hearing on the topic Tuesday was a surprising respite for HODLers (hold on for dear lifers).
The Senate Banking Committee heard testimony from the chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, and the chairman of the Securities and Exchange Commission (SEC), Jay Clayton, on the potential dangers of digital currencies as investments. Their testimony, amid a crackdown on Bitcoin exchanges in China and South Korea, wasn’t as negative as many cyrptocurrency investors had feared.
As a result, Bitcoin prices rose to $7,650 on Tuesday, after dipping below $6,000 just a day earlier.
“We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one,” Giancarlo said.
With the rise of Bitcoin, banking giants such as J.P. Morgan CEO Jamie Dimon have dismissed digital currencies, but have been careful to differentiate it from Blockchain, the distributed ledger that allows Bitcoin to function. While Dimon has called Bitcoin a “fraud,” he said that Blockchain is something “real.”
But Giancarlo struck a different tone by saying that Bitcoin and Blockchain are not so easily separated—a sign investors took as a positive.
“It’s important to remember that if there were no Bitcoin, there would be no distributed ledger technology,” said Giancarlo when asked about the value of Bitcoin’s underlying technology, Blockchain.
Giancarlo, who was sworn in during the Obama era, went on to point to the many uses of the distributed ledger technology including making it easier to figure out who owned which mortgages during the 2008 financial crisis.
“Sixty-six million tons of American soybeans were just handled through a blockchain transaction by the Dreyfus company to China. So Bitcoin is now being used, it’s being used in our American transportation and logistics system,” Giancarlo said, professing that his niece is a so-called cryptocurrency HODLer. “I think this distributed ledger technology has enormous potential. Now how it will be realized, when it will be realized are challenges, and those we can’t say.”
“I hope people pursue it vigorously,” Clayton, who was nominated by President Donald Trump, added about Blockchain.
Still, that’s not to say the cryptocurrency markets will be smooth sailing for investors. Scammers are already targeting the newly formed industry. Meanwhile, some criminals have sought to kidnap Bitcoin investors for ransom.
“We intend to be very aggressive, if nothing else, so that people like my niece can have some security that there aren’t fraudsters and manipulators out there—and there are a lot, too many, far too many of them,” Giancarlo said.
Still, in light of recent events, it does stand to question whether investors are getting ahead of themselves. Bitcoin prices may fall further because of increased regulatory scrutiny. Part of Bitcoin’s recent slide, for instance, has come as a result of an subpoena of Bitcoin exchange Bitfinex by the CFTC for information about its relationship with its dollar-pegged cryptocurrency Tether. That comes amid speculation about whether Tether is artificially propping up Bitcoin prices.
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