In a recent Senate Agriculture Committee hearing on digital commodities oversight, CFTC chair Rostin Behnam expressed openness to the idea of the agency becoming the primary regulator for the crypto industry. The hearing, which took place on July 10, primarily focused on the CFTC’s request for increased regulatory authority. Senator Roger Marshall raised the question of whether it would be beneficial to designate the CFTC as the primary regulator for digital assets, with only a few “offshoots” remaining under the SEC’s jurisdiction. Behnam responded by stating that he believed the CFTC has the necessary capacity, expertise, and experience to take on such a role.
Behnam did acknowledge, however, that certain changes to the definitions of securities and commodities would be required if the CFTC were to assume primary regulatory authority over the crypto market. Senator Marshall also inquired about the SEC’s role in determining which assets should fall under the CFTC’s purview. Behnam expressed his lack of support for the SEC making such decisions unilaterally but emphasized the long-standing collaboration between the two agencies in defining assets operating in grey areas.
During the hearing, Senator Marshall raised the issue of potential lawsuits arising from conflicting asset designations. Behnam admitted that such lawsuits could be a possibility, but highlighted the importance of cooperation between the SEC and CFTC in addressing novel legal questions. Behnam stressed the need for a contract listing system that aligns with the CFTC’s existing powers and facilitates seamless cooperation with the SEC. He emphasized the importance of establishing a system that does not hinder the timely listing of contracts in regulated markets.
Behnam expressed the CFTC’s desire to introduce tokens and contracts into regulated markets expeditiously to minimize investor risks. He argued that a significant portion of the crypto market should fall under the CFTC’s oversight, as many assets cannot be classified as securities. Behnam noted that a substantial portion of the crypto market, estimated to be between 70% to 80%, currently lacks direct federal oversight, highlighting the urgent need for regulatory action.
To establish a comprehensive regulatory regime, Behnam stated that the CFTC would require at least $30 million in the first year and $50 million in the second year. These funds would be allocated towards staffing, administrative expenses, and IT infrastructure. Behnam suggested that user fees collected from registrants could help offset the requested funds. He reiterated Senator Cory Booker’s concerns regarding the urgency of empowering the CFTC with additional authority to combat fraud and manipulation affecting individuals across the United States.
Behnam’s openness to assuming a primary regulatory role for the crypto market reflects the CFTC’s commitment to enhancing oversight and protecting investors in this rapidly evolving industry. Collaboration between regulatory agencies and the allocation of sufficient financial resources will be crucial in establishing an effective regulatory framework for the crypto market.
