The SEC has said public offerings comprising digital tokens, known as initial coin offerings, are securities and subject to the same investor protection rules as equity market offerings. It has hinted it may look to regulate bitcoin exchanges too.
Both regulators have cracked down aggressively on bad digital currency actors, including outfits that have fraudulently solicited funds from investors claiming to invest the cash in virtual currencies or initial coin offerings.
But the question of who is best placed to oversee the underlying cryptocurrency cash market remains unclear.
"We are open to exploring with Congress, as well as with out federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate," Clayton writes in his prepared testimony.
In his testimony, Giancarlo says a federal licensing regime for the cash market would help address gaps in the current system, and could include capital requirements and measures to prevent fraud, manipulation and money laundering.
Lawmakers are also likely to focus on cyber concerns after hackers stole $530 million of digital currency from Japanese exchange Coincheck and others saw lengthy outages, according to a person familiar with the Senate panel's thinking.
At the same time, they will be wary of suffocating innovation in the underlying distributed ledger technology and are likely to explore how regulators can strike a balance between investor protection and innovation, this person said.
This article was provided by Reuters.