What former CFTC Chairman Chris Giancarlo tells his own children about buying their first crypto coin
Former CFTC Chairman Chris Giancarlo says Congress has dropped the ball in regulating the crypto industry.
Chris Giancarlo, the former chairman of the U.S. Commodity Futures Trading Commission, who's also known as "CryptoDad," says he does not directly own any crypto. He decided while he was writing the agency's crypto rules that he would not benefit from them, and he has kept to that position since he left the CFTC.
He acknowledges that he invests in crypto-infrastructure companies and serves as an adviser and independent director at companies that build crypto applications, some of which hold crypto in their corporate treasuries, so he could benefit indirectly if crypto prices rise.
Giancarlo served as chairman of the CFTC from 2017 to 2019 and co-founded the nonprofit Digital Dollar Project. He is the author of "CryptoDad: The Fight for the Future of Money" and the new book "The New Adventures of CryptoDad: The Quest for Financial Freedom in the 21st Century."
In this interview, edited for length and clarity, Giancarlo shares how much bitcoin (BTCUSD) major institutions recommend, whether 401(k) plans should offer crypto, whether stablecoins are as safe as bank deposits, how ordinary investors lose money and what he tells his own children about buying their first coin.
MarketWatch: Your new book is about financial freedom, so what can crypto actually do for an American with a mortgage and a 401(k)?
Giancarlo: If you want to access what you think of as your money, you've basically got to go to a financial institution and say, "Make good on the IOU that you have." But it's not the same thing as having direct access to your things of value, which you have with crypto, which you will have with stablecoins.
MarketWatch: How much bitcoin should an investor in their 40s hold in a long-term portfolio?
Giancarlo: I think most major institutions now are recommending treating it like an alternative, high-risk asset and are recommending, I think, anywhere between 2% and 5%. I think that's about right.
MarketWatch: Bitcoin is trading well below its 2025 high, so why does it behave like a speculative investment right now?
Giancarlo: In advance of any technological change, there's always a speculative aspect of that change. When the railroad first came to North America, it was a tremendously transformative technology. Yet it was accompanied by some wild speculation in railroad stocks, and some fraud and manipulation. That led eventually to a bust and a stock-market crash in those railroad stocks. But you know what happened? When the railroad stocks crashed, nobody went and ripped up the rails and said, "Let's go back to horses and carriages."
'When the railroad stocks crashed, nobody went and ripped up the rails and said, "Let's go back to horses and carriages."'Chris Giancarlo
MarketWatch: Even with that risk, is there a case for owning bitcoin, and how should a cautious investor treat it?
Giancarlo: With bitcoin, uniquely among all these cryptos, it also is a debasement trade. If you believe, and not unreasonably, that the U.S. government is going to continue to issue debt and debase our currency DXY, then owning bitcoin, which has programmed scarcity, is a good hedge against inflation and dollar diminishment.
(Editor's note: A debasement trade is a bet that the dollar will lose buying power. Bitcoin's supply is capped at 21 million coins.)
As a former regulator, I'm not in the business of giving investment advice. I always shy away from the speculative, number-go-up kind of excitement. I believe in prudent investment strategies proven over time - 60/40, 70/30 portfolios. You don't make your wealth in one investment. You make it over the course of a lifetime with prudent savings.
I think it's smart to treat it as a high-risk alternative asset for the time being. But I would encourage your readers to think about crypto less as an alternative asset and ultimately as new architecture. And if people believe what I'm saying, then I think owning some of it is not a bad idea.
MarketWatch: For an ordinary investor who wants to own bitcoin, is it better to use a private wallet or an exchange-traded product?
Giancarlo: It's sort of like the early days of the personal computer: Do you want an appliance-like approach like Apple (AAPL) offers, or do you want to program it yourself with an IBM (IBM) system? I think there's going to be both. For some, working with their own wallet works. They're probably on the more technologically proficient end of the spectrum. Those who, like me, are less technologically adept might like more of a prepackaged solution offered by some of the platforms like Robinhood (HOOD) and Coinbase (COIN).
By the way, I do want to disclose that I do not own crypto. When I was chairman of the CFTC, I took the position that as long as I was writing rules for crypto, it would be inappropriate for me to benefit in any way from the rules I was writing. I've kept to that position since leaving the CFTC because I'm such an outspoken proponent. Your readers should know that the things I'm talking about, I don't benefit directly from, because I don't own bitcoin or Ethereum (ETHUSD) or any of the other major cryptos.
'You don't make your wealth in one investment. You make it over the course of a lifetime with prudent savings.'Chris Giancarlo
MarketWatch: Should 401(k) plans offer crypto?
Giancarlo: Yes. I think they should, but 401(k)-plan managers, in putting forward products to their customers, should accompany that with sound advice about prudent investment strategies and diversification.
MarketWatch: Is a dollar stablecoin as safe as a bank deposit?
Giancarlo: Actually, in some ways it is and in some ways it's not. It's not backed by a government guarantee the way a bank deposit is. But a bank deposit is only guaranteed up to a certain amount.
On the other hand, stablecoin issuers are restricted under the Genius Act as to what they can invest in. They can only invest in short-dated Treasury securities for the most part, unlike a bank, which is lending money out to all kinds of ventures that have risk associated with them. So I think the likelihood of a bank failure is greater than the likelihood of a stablecoin company failure. It's in some ways safer, in some ways less safe.
(Editor's note: The FDIC insures deposits up to $250,000 per depositor, per bank.)
MarketWatch: What is the most common way that ordinary investors lose money in crypto, and how can they avoid it?
Giancarlo: There's a lot of scams out there, sadly. I think the job of regulators is to go there and police the markets, be the cop on the beat and punish wrongdoers who seek to take advantage. On the other hand, they're not going to catch every bad guy, and therefore it's incumbent on us as investors to be smart and realize that if something seems too good to be true, it probably is too good to be true.
MarketWatch: What happens if Congress does not pass the market-structure law known as the Clarity Act?
Giancarlo: It's well named, actually, because it has the potential to bring clarity. The sad part is it doesn't look like it's going to get done. If it doesn't get done before this Congress leaves town, then we start over again in the new Congress. Therefore, the CFTC and the SEC, I think, are duty-bound to proceed under existing authority and write rules as best they can, until someday Congress, quite frankly, gets its act together and passes this law.
(Editor's note: The Senate recently voted 49-50 against advancing the Clarity Act; it needed 60 votes to open floor debate.)
In 2018, I testified before the Senate Banking Committee. I was attending the hearing as the head of an important regulatory agency, but I really wanted to talk to them as a dad. I said, 'Look, I've got college-age kids that are investing in crypto, and we need to protect them. We need to put in place sensible laws.' Here we are eight years later, and we're still waiting for that legislation from Congress. I think Congress has sadly been derelict in its duty.
'I think Congress has sadly been derelict in its duty.'Chris Giancarlo
MarketWatch: In your opinion, are sports contracts on prediction markets financial products or gambling?
Giancarlo: Traditional gambling, which is well policed by state authorities, involves a booking. Whether it's the house or the casino or the sportsbook, they are the counterparty to every trade. When you walk into a casino, you don't get to set the odds.
That's not the way prediction markets work. There's no house, there's no casino. They don't make the odds. All they do is put forward a proposition and invite a marketplace to build. The house just charges a fee and doesn't benefit if the public loses the way it does in a casino.
We have traditionally regulated marketplaces at the federal level and retail establishments at the state level. Marketplaces, on the other hand, are two-way markets that are traditionally regulated at the federal level because they're borderless. Anybody in the world can participate, and the states simply don't have the ability to regulate global markets. There's just too much money involved, and state tax revenue. It's really a battle over money.
MarketWatch: Looking back at the 2017 launch of bitcoin futures, did the regulators or the crypto industry make any mistakes?
Giancarlo: That's on me. At the time, I worried a lot that we were potentially making mistakes. But I felt we were duty-bound to put a regulatory framework around this. If Congress wanted to ban bitcoin, they were free to do so. But since they hadn't, it was a legal product, so it was our duty to create a regulatory structure, and so we did.
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