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The CFTC should regulate cryptocurrency, not other agencies
The Commodity Futures Trading Commission, rather than the Securities and Exchange Commission or the United States Treasury, should oversee cryptocurrency markets, according to its former chairman in an interview with Yahoo Finance on Friday.
As the debate over digital token oversight takes shape and the White House develops an overarching strategy, J. Christopher Giancarlo believes it is time for Congress to take the lead and allow his former agency to regulate the asset class. The FBI and Department of Justice have joined an inter-agency coalition that includes the SEC and Treasury.
However, appointing the CFTC as primary regulator would make it easier for institutions to participate in retail markets "because those markets would have a well-established federal regulator overseeing those markets, and looking after things like consumer protection, adequate funding, and protections against fraud and manipulation of those markets," Giancarlo explained to Yahoo Finance Live.
The ex-regulator also proposed industry oversight by a self-regulatory organisation (SRO), as well as a revision to how crypto assets are classified as financial instruments.
Indeed, current CFTC Chair Rostin Behnam made the same pitch to lawmakers last week, with Congress set to be the final arbiter of any new regulations. The Federal Reserve is also considering issuing a digital dollar, a proposal that has been stymied by fears that a Fed coin would undermine the US dollar's dominance.
Separately, the SEC has been ramping up enforcement actions in an effort to protect investors ahead of the Biden administration crafting an executive order, which Yahoo Finance reported could come as soon as next week.
SEC Chair Gary Gensler has publicly asked lawmakers to introduce legislation. However, formal legislation is not expected to be enacted this year.
Giancarlo told Yahoo Finance that while he expects "a lot of proposals to flow in 2022" he doesn't see Congressional consensus for a "comprehensive crypto bill" passing this year, owing primarily to the midterm elections.
'Totally antithetical'
Giancarlo pointed out that the market's volatility is being exacerbated by the stalemate over cryptocurrency regulation. According to Giancarlo, the lack of clarity is a major barrier for many institutions such as insurance companies, pension funds, and hedge funds to justify investment in the asset class.
At the moment, no federal agency has jurisdiction over spot trading in cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). According to TradingView data, these two tokens account for more than 60% of the market's $2 trillion value.
The CFTC's Benham argued that, with Congress' permission, the CFTC could bring order to the notoriously volatile market, citing a high number of cybersecurity issues, speculative retail trading, and the outstretched use of leverage.
However, Nicholas Losurdo, a former SEC legal counsel who is now a partner with multinational law firm Goodwin, believes that delegating oversight to the CFTC would be "completely antithetical" given the SEC's current enforcement authority.
"The SEC's message is basically that everything is a security, both formally and informally" Losurdo stated to Yahoo Finance. "I just don't think the SEC will give up that territory, and even if Congress intervenes, I don't think they'll be out of the picture".
The attorney stated that dividing crypto oversight between the two agencies would be counterproductive. Meanwhile, "for the CFTC to have the authority, it would have to infer that those assets are not securities, at the very least" Losurdo objected.
"This could also be interpreted as a retreat from the SEC's policy positions, which have resulted in penalties totalling hundreds of millions of dollars paid by players in this space" he added.
In an effort to stay ahead of looming regulation, the industry has squandered money on lawmakers, with data from CryptoHead indicating that crypto lobbying has more than doubled in the last year, to around $5 million. According to the data, that figure could reach $15 million by the end of 2023.
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By Crypto PiratesThe Commodity Futures Trading Commission, rather than the Securities and Exchange Commission or the United States Treasury, should oversee cryptocurrency markets, according to its former chairman in an interview with Yahoo Finance on Friday.
As the debate over digital token oversight takes shape and the White House develops an overarching strategy, J. Christopher Giancarlo believes it is time for Congress to take the lead and allow his former agency to regulate the asset class. The FBI and Department of Justice have joined an inter-agency coalition that includes the SEC and Treasury.
However, appointing the CFTC as primary regulator would make it easier for institutions to participate in retail markets "because those markets would have a well-established federal regulator overseeing those markets, and looking after things like consumer protection, adequate funding, and protections against fraud and manipulation of those markets," Giancarlo explained to Yahoo Finance Live.
The ex-regulator also proposed industry oversight by a self-regulatory organisation (SRO), as well as a revision to how crypto assets are classified as financial instruments.
Indeed, current CFTC Chair Rostin Behnam made the same pitch to lawmakers last week, with Congress set to be the final arbiter of any new regulations. The Federal Reserve is also considering issuing a digital dollar, a proposal that has been stymied by fears that a Fed coin would undermine the US dollar's dominance.
Separately, the SEC has been ramping up enforcement actions in an effort to protect investors ahead of the Biden administration crafting an executive order, which Yahoo Finance reported could come as soon as next week.
SEC Chair Gary Gensler has publicly asked lawmakers to introduce legislation. However, formal legislation is not expected to be enacted this year.
Giancarlo told Yahoo Finance that while he expects "a lot of proposals to flow in 2022" he doesn't see Congressional consensus for a "comprehensive crypto bill" passing this year, owing primarily to the midterm elections.
'Totally antithetical'
Giancarlo pointed out that the market's volatility is being exacerbated by the stalemate over cryptocurrency regulation. According to Giancarlo, the lack of clarity is a major barrier for many institutions such as insurance companies, pension funds, and hedge funds to justify investment in the asset class.
At the moment, no federal agency has jurisdiction over spot trading in cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). According to TradingView data, these two tokens account for more than 60% of the market's $2 trillion value.
The CFTC's Benham argued that, with Congress' permission, the CFTC could bring order to the notoriously volatile market, citing a high number of cybersecurity issues, speculative retail trading, and the outstretched use of leverage.
However, Nicholas Losurdo, a former SEC legal counsel who is now a partner with multinational law firm Goodwin, believes that delegating oversight to the CFTC would be "completely antithetical" given the SEC's current enforcement authority.
"The SEC's message is basically that everything is a security, both formally and informally" Losurdo stated to Yahoo Finance. "I just don't think the SEC will give up that territory, and even if Congress intervenes, I don't think they'll be out of the picture".
The attorney stated that dividing crypto oversight between the two agencies would be counterproductive. Meanwhile, "for the CFTC to have the authority, it would have to infer that those assets are not securities, at the very least" Losurdo objected.
"This could also be interpreted as a retreat from the SEC's policy positions, which have resulted in penalties totalling hundreds of millions of dollars paid by players in this space" he added.
In an effort to stay ahead of looming regulation, the industry has squandered money on lawmakers, with data from CryptoHead indicating that crypto lobbying has more than doubled in the last year, to around $5 million. According to the data, that figure could reach $15 million by the end of 2023.
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