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CTFC Chair Opposes Gensler — 70% of Crypto Market is Commodities

Published October 3, 2023 11:39 AM
Teuta Franjkovic
Published October 3, 2023 11:39 AM

Key Takeaways

  • CFTC Chair, Rostin Behnam, reiterated the importance of establishing a regulatory framework for the crypto industry.
  • Behnam highlighted the CFTC’s enforcement efforts, with orders of over $6bn in financial relief in the past fiscal year.
  • Notably, 45 of these actions were related to digital asset misconduct, underlining the need for clearer regulations.
  • The CFTC Chair suggested that 70% of the crypto industry should be categorized as commodities.
  • He urged Congress to pass legislation that would enhance the CFTC’s authority in regulating commodity tokens.

U.S. Commodity Futures Trading Commission (CFTC) Chair, Rostin Behnam, restated  his position on the necessity of putting in place a robust regulatory framework in the emerging cryptocurrency industry. He spoke at the Futures Industry Association Expo 2023  on October 2.

Behnam’s remarks are some of the most forceful to date in a string of appeals for more focus on modernizing policy frameworks to better govern the digital asset market.

Gary Gensler, Behnam’s equivalent at the U.S. Securities and Exchange Commission (SEC), has maintained that the securities rules already in effect are sufficient to supervise the business. These remarks stand in direct contrast to Gensler’s position.

Commodities Vs. Securities Definition

Behnam highlights that in the past fiscal year, the CFTC’s Division of Enforcement secured orders for over $6 billion in financial relief. Among these actions, 45 were related to digital assets, accounting for over 34% of the 131 similar actions initiated by the Commission since 2015.

“45 of those [enforcement] actions this fiscal year involved digital asset-related misconduct, representing over 34% of the 131 such actions brought by the commission since 2015,” he stated .

This speech reinforces Behnam’s stance  that digital asset markets require a clear regulatory framework, in contrast to SEC Chairman Gary Gensler, who believes existing securities regulations are sufficient for overseeing digital assets.

Behnam also asserted that roughly 70% of the cryptocurrency industry should be classified as a commodity. He has urged Congress to enact legislation that would strengthen the CFTC’s authority over commodity tokens by laying out clear regulations.

In his address, Behnam also discussed the importance of taking proactive steps to maintain strong cybersecurity, system security, and customer safety. He stated that the Commission’s goal is compromised by waiting until victims are in pain.

Behnam highlighted a significant legal victory his agency achieved against Ooki DAO , resulting in the shutdown of the decentralized autonomous organization and the collection of $643,542 in fines. The U.S. District Court for the Northern District of California issued a default judgment, classifying Ooki DAO as a ‘person’ under the 1936 Commodity Exchange Act (CEA).

“Cornerstone of Our Era”

When he spoke about the CEA’s future course, Behnam went back to it. Disintermediation brought about by ground-breaking technologies, such as DeFi, AI, and standard WiFi, is the cornerstone of our most recent era, he claimed.

However:

“The limits in the CEA established in essentially another era create real barriers to engaging in rulemaking and policy that is necessary to our mission, but just beyond our scope,” he added .

Moreover, these limits force the agency “to engage in increasingly resource-intensive quests for assurances that we are acting within the bounds of our intended remit.”

Vertical integration in financial markets is expanding, raising regulatory concerns, and reshaping the meaning of customer protections, as Behnam pointed out.

He emphasized the importance of additional regulations for the crypto and DeFi sectors, despite ongoing legal challenges. This underscores the ongoing divergence of opinions between Behnam and his SEC counterpart regarding cryptocurrency market regulation.

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