The Commodity Futures Trading Commission is ready to be the “primary cop on the beat” for digital assets, CFTC acting chair Rostin Behnam said at his confirmation hearing on Wednesday.
Fast facts
- As of Tuesday, “the total size of the digital asset market was US$2.7 trillion and among that $2.7 trillion, nearly 60% were commodities. So with that in mind, I think it’s important for this committee to reconsider and consider expanding authority for the CFTC,” Behnam said, adding that it would mean a departure from CFTC’s historical role as a derivatives regulator. However, given the size, scope and scale of the emerging digital assets market, it is crucial that the CFTC becomes the primary regulator, Behnam said.
- The U.S. Securities and Exchange Commission chair Gary Gensler has previously claimed that the majority of cryptocurrencies are equity. Therefore, Behnam’s claim that 60% of cryptocurrencies are commodities directly contradicts that of Gensler. In fact, Gensler has also been vying for an expansion of the SEC’s authority to reign in a crypto realm that he calls “the Wild West,” indicating there might be a clash of interest between the two regulatory bodies.
- Behnam pointed out that the CFTC has already been pursuing enforcement action in the crypto market for the last few years. A week ago, it slapped a US$41 million fine on Tether for misleading claims about its stablecoin’s backing. Behnam went on to say that virtual currencies pose banking, prudential finance as well as clearing and settlement risks, making it crucial to have a regulator with proper authorities to mitigate these risks. “We really also need to have a conversation about market regulation and sort of the exchange, the purchase and sale of these coins in a regulatory structure for both securities and commodities,” he added.
- At present, the CFTC has oversight over the crypto derivatives market and can take action against fraud in the underlying crypto spot market. The SEC, on the other hand, oversees securities and entities that seek to list and trade securities. There is no federal regulator for the crypto spot market at present. It is up to Congress to decide who will get to be the primary cop in the digital assets market.
- But Behnam did not give any indication of a turf war. “This directly touches both of our markets, but the agencies have a rich history of working together and really dividing jurisdiction along thin lines, whether it’s single stock futures back in the ’80s or security based swaps after the financial crisis,” Behnam said. “So we are a team above all else and we’ll work together, but we understand that we both have different missions and jurisdictions.”
- Until the matter is settled by Congress, the CFTC will continue to bring enforcement actions against fraudulent actors in the crypto space.