On February 6, 2018 at 10 AM, in the Dirksen Senate Office Building, the United States Senate held a hearing on Bitcoin (BTC), cryptocurrency, and government's role in oversight. Investors and traders had long awaited the hearing. Some feared that the U.S. government, led by President Donald Trump and Attorney General Jeff Sessions, would crack down on the cryptocurrency sector with a heavy regulatory hand. But the hearing was measured and optimistic, giving the crypto community more hope and joy than expected.

The main participants who testified to the Senate Banking Committee were the Securities and Exchange Commission (SEC) Chairman Jay Clayton and the Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo. Clayton was appointed by Trump in January 2017; Giancarlo was nominated as Commissioner by Obama in 2013. Both have storied careers in finance and the private sector.

Some parts of the hearing could be construed as bearish for crypto. Initial coin offerings (ICOs) and federal securities laws were emphasized. Democratic Senator Elizabeth Warren pressed hard against ICOs, stating that many are effectually Ponzi schemes, and that investors should be protected from deceptive and misleading advertising. In response, Clayton confirmed that no company has registered their ICO as required under securities laws and that the SEC was watching many ICOs. He reiterated that the SEC would continue to regulate all ICOs as securities. As ICOs make up a large part of the crypto space and many ICOs have operated in violation of securities laws, the hearing's focus on the legality of ICOs may be bearish for those respective ICOs.

However, the overall sentiment was bullish. Clayton proclaimed support for blockchain technology, hoping that people will pursue its potential. After Republic Senator Tom Cotton asked about the potential of distributed networks, Giancarlo responded optimistically, stating: "It's important to remember that if there were no Bitcoin, there would be no distributed ledger technology [...] 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." He also touted the transparency and regulatory benefits of blockchain, adding that it would have helped regulators realize the risks of mortgage-related derivatives before the global financial crisis. Then Giancarlo held up his thirty-year-old niece - whom he referred to as a BTC "hodler," or someone who would hold onto BTC for dear life - as an example of the kind of honest investor who should be supported by the regulatory framework. Finally, Warner sounded even more bullish on crypto. He compared crypto to cell phones and wireless communication in that it has the potential to be a world-changing technology. He predicted $20 trillion in market value by 2020.

The crypto community largely ignored the ICO concerns and focused on Giancarlo's and Warner's statements. On the r/Bitcoin and r/Cryptocurrency subreddits, people made memes praising Giancarlo and his niece as heroes. Investors also rejoiced at the light-touch regulatory attitude, and the prices of BTC and other cryptos bounced sharply from 3-month lows. After the hearing, Giancarlo gained 14 times more Twitter followers and thanked his new fans.

Going forward, investors would be wise to avoid ICOs and platforms that enable ICOs, as they may be caught up in fraud and unregistered securities cases. That includes popular cryptos like Ethereum (ETH) and NEO (NEO). But investors should seek out coins that promise a practical vision of high-tech change. These include portfolio staples like BTC, Litecoin (LTC), IOTA, Stellar (XLM), Nano (XRB), Quantum Resistant Ledger (QRL), and more. The US government likes innovation, and will help crypto keep innovating.

The author holds long positions in BTC and IOTA.