After the SEC sued Binance, Coinbase and other crypto exchanges on Monday morning, Tuesday the House Agriculture Committee convened a two-panel hearing to examine the regulation of cryptocurrency spot markets.
First, lawmakers asked questions of Rostin Behram, Chairperson of the Commodity Futures Trading Commission. They then turned to a 5-person panel made up by industry executives and former CFTC employees.
Behnam focused his comments on classifications of crypto-tokens, enforcement’s current regulatory pattern and the necessity for clarity in the regulations. This week, the SEC deemed more than 10 crypto tokens as securities in its Binance and Coinbase lawsuits.
“There are some who argue ‘the SEC’s got this,'” Dusty Johnson (R-S.D.) said in his time allotted to ask Behnam a question.
Johnson asked: “Should the SEC control all digital assets?”
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“This is not a zero-sum game,” Behnam stated. “For anything that the CFTC might get in legislative or legal authority, I’m not taking it from someone else. There is a regulatory vacuum, there is a gap in regulation over digital commodity assets.”
SEC securities authority
Behnam said that the SEC has authority over securities and assets. “the fact of the matter is the largest token, bitcoin, is a commodity, and that was determined by a US court, and that, under US law, is unregulated.”
Behnam noted that very few exchanges listed crypto assets already officially classified as commodities. Behnam, the CFTC chairman, said that there is a need for the regulator to have more authority in the crypto commodities sector.
Many lawmakers voiced their concerns regarding the pattern perceived by US enforcement of the US regulatory system.
“Regulation by enforcement is not an appropriate way to govern a market, adequately protect customers or promote innovation,” During his prepared remarks, Glenn Thompson (R-Penn.) said.
Rep. Jim Govern (D-Mass.) asked Behnam about the possible consequences if these patterns continue.
“The evidence is in our enforcement record, and we even point to the SEC’s enforcement record as well,” Behnam said. “We brought 82 cases over about 8 years, and [these] 82 cases [came from] an agency that doesn’t have regulatory authority.”
According to the CFTC Chair, the issue isn’t that the CFTC or SEC shouldn’t charge entities who violate existing laws. Behnam believes that Congress needs to have more authority in order to establish policies and address crypto-risks.
“My fear is that this… is the tip of the iceberg,” Behnam told me. “As this market ebbs and flows in size, and it has largely stabilized in the last six months, if it starts to peak and move into a direction of growing, you could potentially have financial stability concerns.”
The hearing on Tuesday began just hours after SEC announced charges against cryptocurrency exchange Coinbase over alleged violations of securities laws. The SEC filed a similar complaint against Binance the day before.
On Tuesday, the hearing will feature a second panel, which includes Robinhood Chief legal compliance officer Dan Gallagher and Coinbase’s Paul Grewal, chief legal officer.
The second panel also includes former CFTC Chairman Christopher Giancarlo and Walt Lukken. Former CFTC Acting Chair Walt Lukken is on the list of witnesses.
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