CFTC Should Oversee Crypto Spot Markets, Chief Reiterates Before Congress
Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam has made a fresh appeal to Congress to grant his agency authority to oversee crypto spot markets in the U.S.
Behnam, who became the agency's acting chief last year before being confirmed to a full term heading the federal regulator, told the Senate Agriculture Committee on Wednesday he believes his agency is best placed to monitor trading, reiterating a stance he first took in October. At present, crypto spot markets are largely regulated at the state level. The CFTC oversees derivatives markets such as bitcoin and ether futures, and the Securities and Exchange Commission oversees tokens believed to be securities, as well as stocks and funds.
"We are past the stage where digital assets and decentralized financial technologies are a research project, sandboxing what may come in the future. The issues are at the front and center of our thinking at the Commission in addition to our traditional regulatory, oversight and enforcement responsibilities," Behnam said in introductory remarks. "The CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market."
The regulator requested that Congress, in addition to granting the CFTC additional authority, also fund the agency with an extra $100 million to properly oversee crypto markets. The agency's current annual budget is roughly $300 million.
The added funds would go toward building up internal expertise as well as better enforcing the law, Behnam said. During the hearing he said a large part of enforcement actions come from tips and whistleblowers at present, as one example.
Behnam said the agency does not currently have all of the expertise it needs to properly oversee crypto. In response to a question from Sen. Kirsten Gillibrand (D-N.Y.), Behnam said his team does not currently have sufficient resources or knowledge to monitor and protect against cyberattacks in the digital asset sector.
However, in a follow-up response to Sen. Amy Klobuchar (D-Minn.), he said he would be willing to build up his team.
Defining jurisdiction
One of the key issues Congress would have to address is just where the CFTC's jurisdiction ends and where the SEC's begins. Behnam acknowledged this during a discussion with Sen. John Hoeven (R-N.D.), saying it is important to draw "clear, distinct lines" between which crypto assets are securities and which are not.
"The most noticeable gap is what constitutes a security and what constitutes a commodity," he said, adding that "at its core, we are a market regulator ... we would build up expertise in places we need it."
The Dodd-Frank Act reform of traditional markets in the wake of the 2008 financial crisis is a "perfect example" of the type of work the CFTC could engage in for the crypto markets, he said. The Dodd-Frank Act helped reform derivatives markets (among others) over the past decade.
In addition to his remarks, Behnam also filed a response from the CFTC to a series of questions previously published by the Senate Agriculture Committee, reiterating the same arguments about how the crypto market should be regulated at the federal level.
"In my opinion, there are important principles missing from the current regulatory framework applicable to digital asset markets that we see in other federally regulated markets, particularly ones that primarily cater to retail investors," Behnam wrote in the document. "A federal regulatory regime may ensure that certain safeguards are in place to address the risks to individual investors, market integrity and systemic stability. Those safeguards could include pre-trade and post-trade transparency and uniform standards around settlement, data reporting, cyber security and leverage."
