‘The million-dollar question’: CFTC chair on regulating crypto alongside the SEC


Speaking at a Rutgers Law and Wall Street Blockchain Alliance event in Manhattan on Monday, Commodities and Futures Trading Commission Chairman Rostin Behnam sought to dispel the narrative of a turf war between his agency and the Securities and Exchange Commission. and Values.

“It’s a pretty cynical view to suggest that two agencies can’t figure it out and work together,” he told an audience of lawyers and industry leaders.

With crypto legislation stalled in Congress and unlikely to pass with elections just around the corner, regulators have argued in a series of public talks and enforcement actions about where the authority lies. In particular, the question of which cryptocurrencies are commodities and subject to CFTC oversight, as opposed to securities and are subject to SEC oversight, has created a perceived divide between the two key agencies.

Behnam reiterated his belief that the two largest cryptocurrencies, Bitcoin and Ether, are commodities. SEC Chairman Gary Gensler has questions raised on whether Ether should fall under the jurisdiction of the SEC due to its switch to a proof-of-stake consensus mechanism.

“I have suggested [Ether] it’s a commodity, and Chairman Gensler thinks otherwise,” Behnam said.

However, he denied the common industry sentiment that the CFTC would be the most favorable regulator. “Our enforcement history speaks for itself,” he said.

He also said the Digital Commodities Consumer Protection Act, legislation introduced by Senators Debbie Stabenow (D-MI) and John Boozman (R-AR) of the Senate Agriculture Committee that is believed to be the bill on cryptocurrencies with more chances of being approved. —would not give the CFTC full authority to categorize cryptocurrencies.

Instead, he argued that the CFTC and SEC would continue to work together, pointing to the two agencies’ history of collaboration, such as the development and evolution of security futures. He said the existing self-certification process, in which platforms go to the CFTC to register, should suffice for crypto participants, even when the commodity vs. exchange issue is in question.

“This is the million dollar question,” he said. “How do we engage with the SEC when a product is in the gray area?”

The answer, he argued, would be for the two agencies to collaborate on the legal and political issues to find a solution, an outcome many in the industry see as insufficient, especially considering that neither of the proposed bills creates clarity around the categorization of the crypto assets.

Behnam said legislation is needed to create a regulatory framework and provide the agency with resources. The CFTC recently released its application summary for fiscal year 2022, where more than 20% of its 82 shares were crypto-related. Between those, and the 62 cryptocurrency-related cases since 2014, he said each and every one of them has been the result of a whistleblower, tip, or tip, as opposed to traditional surveillance mechanisms. He attributed it to being “handcuffed” by the lack of tools that the agency normally has in traditionally regulated markets.

“The underlying fear and concern is that we are not doing enough,” he said. “If we had more resources, we could expose more fraud and manipulation.”

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