Satoshi Nakamoto was most likely not a Russian money launderer, but that theory was briefly proposed during a meeting hosted by the Commodity Futures Trading Commission (CFTC) on Friday.
The CFTC’s Technology Advisory Committee (TAC) subcommittee on cryptocurrencies discussed securing digital assets during the hour-long session, highlighting issues with protecting investors’ assets and how regulators may be able to assist in that area.
CFTC commissioner Brian Quintenz opened the meeting with a brief overview of the subcommittee, which was formed in February, explaining that the session “should spur further discussion about how the CFTC, other regulators, spot platforms, and market participants can all contribute to enhancing this market’s credibility and safety.”
As Andre McGregor of TLDR Capital pointed out, billions of dollars worth of bitcoin has been stolen over the last decade from crypto exchanges.
“Consumers blindly trust hot wallets,” he explained, and while some investors set up hardware wallets and take other actions to protect their holdings, many do not.
He referenced hacks from exchanges such as Mt. Gox, Bitfinex and even more recent ones such as last month’s $60 million theft from Zaif.
Richard Gorelick, the head of market structure at trading firm DRW Holdings, told the meeting that “smart regulation” may be able to help the industry develop better practices to protect investors.
But this would only form one part of any wider potential solution, he said.
“One of the points we raised on the subcommittee was that there is an opportunity for industry organized efforts to help fill some of these gaps,” he said, adding:
“They could be self-regulatory organizations or similar structures that help to define and enforce best practices and standards and accountability across the industry and there are efforts underway to start thinking about and building these types of organizations. There are lots of precedents in the traditional financial markets that we can look to for innovative governance structures that apply with markets that touch multiple jurisdictions.”
Two Sigma Investments managing director Alexander Stein added that improving exchange security would aid regulators and investors as well.
“The Achilles heel [of bitcoin] is … [the] unregulated world of exchanges where the exchange may or may this not be employing AML/KYC and if I can deposit bitcoin into some exchange outside of the United States, [that’s game],” he said.