CFTC Chairman Calls for Expanded Crypto Regulatory Authority

CFTC Chairman Rostin Behnam has underscored the necessity for increased funding and expanded regulatory authority to effectively oversee cryptocurrency spot markets, as legislative efforts toward comprehensive regulation gain momentum.

Addressing the Senate Agriculture Committee during a hearing on Digital Commodities oversight, Behnam emphasized that the Commodity Futures Trading Commission (CFTC) is well-suited to act as the principal regulatory body for cryptocurrencies. Referencing a recent Illinois court ruling that classified Bitcoin (BTC) and Ethereum (ETH) as digital commodities, Behnam asserted the CFTC’s “expertise and capacity” to establish and enforce a robust regulatory framework. However, he also highlighted the need for additional tools and resources to fulfill this role effectively.

Senator Cory Booker echoed Behnam’s sentiments, noting the repeated calls for equipping both the CFTC and the Securities and Exchange Commission (SEC) with adequate resources to oversee the vast and complex crypto market. Booker urged the clarification of U.S. crypto policies and the empowerment of the CFTC with expanded regulatory powers.

Efforts to Establish a Regulatory Framework Intensify

Amid an ongoing jurisdictional dispute between the CFTC and the SEC over cryptocurrency regulation, policymakers are intensifying efforts to develop a coherent regulatory framework. A significant issue is the operational capacity disparity between the two agencies, with the CFTC having approximately 700 employees compared to the SEC’s 4,500. Despite this, over 50% of the CFTC’s litigation cases have involved crypto fraud or digital assets.

Behnam highlighted the significant resource allocation required to address crypto-related issues, stating, “It is a staggering statistic for an agency that oversees a trillion-dollar market to allocate half its resources to a market it does not regulate or receive appropriated funds for. It puts both markets at risk and exposes the prevalence of fraud in the crypto space.” While confident in the CFTC’s ability to regulate the crypto market, Behnam emphasized the necessity for a new regulatory regime with clear definitions distinguishing commodities from securities.

Behnam believes that 70-80% of cryptocurrencies are non-securities, a view that contrasts with SEC Chairman Gary Gensler’s position. Gensler has consistently argued that existing federal laws classify most cryptocurrencies as securities, though the SEC has not definitively stated this position.

Proposed Legislation to Empower CFTC Oversight

Senator Debbie Stabenow, chair of the committee, announced a forthcoming bill that would grant the CFTC formal regulatory oversight of the cryptocurrency market. The proposed legislation primarily targets centralized platforms, such as crypto exchanges, and mandates capital reserve requirements and cybersecurity compliance for digital asset service providers.

Stabenow’s proposal also includes provisions for recurring funding and constitutional authority for the CFTC to police digital commodity markets, including crypto spot markets. Despite her planned resignation in January 2025, Senator Stabenow is actively promoting the bill’s terms in Congress, with committee members expected to receive detailed language packages shortly.

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