Key Takeaways
- The CFTC seeks greater power to regulate digital currency and cash commodities markets
- To build up expertise, the regulator wants to spend $100 million more.
A Senate Committee heard Wednesday from the chairman of the Commodity Futures Trading Commission that his organization wanted to regulate the spot cryptocurrency market.
In a Senate Committee on Agriculture focus on “Examining Digital Assets: Risks, Regulation, and Innovation,” Rostin Beinam, Chairman of the CFTC, stated that it was not possible to monitor crypto-spot trading activities.
“Any cash commodity markets benefit from federal oversight, however, the digital asset market, which at present is most directly supervised through state money transmitter licenses, is unique and presents many novel issues for the CFTC, given our limited authority to police these markets,” Behnam.
Behnam said that digital assets and decentralized financing were beyond research and his agency is ready to implement them. “well situated” To play a key role in the cash commodities market for digital assets. Cash commodities are physical products, such as bitcoins and ether in this instance, rather than derivatives.
Behnam, when asked what the most important action Congress can take to protect customers is to bring a regulatory structure to crypto markets.
The CFTC, therefore, is requesting more regulatory oversight including transparency pre and after trades, along with $100 million funding as a guide, on top of its $304 million that was already allocated in the federal government budget.
Behnam had first called in October for a regulatory body to monitor crypto activity. Benham added that the nascent assets class mainly consisted of retail traders who were engaged in speculative activities and the CFTC would be ready to shield their investors. “fraud and manipulation.”
Setting a boundary for regulation
CFTC, established in 1974, is an independent federal agency tasked by the United States government with regulating traditional derivatives market. It also has an extremely narrow mandate that regulates fraud and manipulation on cash markets.
Securities and Exchange Commission, on the other side of things, is a government independent agency that has the role to enforce securities laws and prevent any market manipulation.
Congress must decide, in order to create a regulatory structure for digital assets, what is a commodity versus what is a security.
Asked by Sen. John Hoeven, during the hearing, whether there should be a lead agency for regulating cryptocurrency, Behnam said the issue his agency and the SEC are facing is no different from they issues they have faced in the last 50 years.
“I certainly believe we could end up in a place where both agencies have jurisdiction in cash markets,” Behnam stated that while the SEC is a market regulator, it would also have authority over securities. The CFTC has the same jurisdiction with commodities.
Sam Bankman Fried, CEO of FTX in response to questions from industry participants said that the data on crypto futures was available for all to see and offered adequate transparency. While he admitted that digital assets were regulated, “holes.”
“With cash commodity markets it is substantially less clear,” Bankman-Fried spoke about the jurisdictional boundaries between regulators and agencies of government. “This leads to all the standard risks with having not enough federal oversight.”
Bankman-Fried said that the lack of a clear regulator and the patchwork regulation created risks for consumers as well as systemic risk.
“This has led to the state we’re in today where despite the majority of the intellectual property, for the digital asset industry originating from the United States, 95% of [trade] volume occurs offshore.”
He stated that the US was currently blocked from accessing the majority digital assets. Bankman Fried said that providing federal oversight and clarity could be an important step in bringing liquidity and the business of digital assets back to shore.
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