Donald Trump’s incoming administration is considering transferring regulation of cryptocurrency exchanges and the spot market for cryptocurrencies, which are considered commodities, to the Commodity Futures Trading Commission (CFTC).
The move will allow the CFTC to regulate a significant portion of the $3 trillion digital asset market and expand the commission’s reach.
Will CFTC dominate digital asset regulation?
The move could significantly reduce the regulatory influence of the U.S. Securities and Exchange Commission (SEC). The U.S. Securities and Exchange Commission under Gary Gensler has taken significant regulatory action against cryptocurrency companies. President-elect Donald Trump and his team believe that SEC enforcement actions have slowed cryptocurrency innovation in the United States and that a looser approach is needed to drive innovation and promote growth.
“The Trump administration is eyeing the U.S. Commodity Futures Trading Commission (CFTC) to oversee digital asset regulation, according to Fox News.”
If the CFTC gains regulatory control over cryptocurrencies, it would be a major victory for the industry in the United States. The agency became its go-to regulator due to its relaxed approach to cryptocurrencies. Chris Giancarlo, former chairman of the U.S. Commodity Futures Trading Commission (CFTC), said:
“With adequate funding and the right leadership, I think the CFTC can begin regulating digital commodities on day one of Donald Trump’s presidency.”
The former CFTC chairman has tried to convince the Senate Agriculture Committee, which oversees the CFTC, to support its oversight of the spot cryptocurrency market, noting that the regulator began to dabble in Bitcoin (BTC) as early as 2015, calling it for merchandise.
Perceive a lighter touch
The CFTC oversees the $20 trillion U.S. derivatives market, which includes trading in futures, options and physical commodities such as gold, silver, oil and wheat. The CFTC sets market rules and takes enforcement actions against institutions that violate rules and regulations. However, it is considered to be more lenient than the SEC. This is because the derivatives market is dominated by institutions, which are considered to be better equipped to manage risk.
CFTC Chairman Rostin Behnam, who has a relatively dovish stance on cryptocurrencies, also asked the Senate Agriculture Committee for additional funding to more effectively regulate the cryptocurrency market rather than taking enforcement action. The CFTC’s budget of $706 million is four times less than the SEC’s $3 billion budget for fiscal 2024. The CFTC has 700 employees, far fewer than the SEC’s 5,300.
About 50% of the CFTC’s enforcement actions are against prominent cryptocurrency companies and businesses. SEC Chairman Benham said this is a shocking statistic for an agency that has no authority to regulate the industry. The additional funding is critical for the CFTC to begin regulating fraud and manipulation in spot cryptocurrency markets.
Uncertainty over the classification of digital assets and the reluctance of the SEC and CFTC to draft specific rules has led the two agencies to regulate the cryptocurrency space through enforcement actions.
Disclaimer: This article is for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.
