CFTC Chair Behnam Testifies On Regulation Of Digital Belongings – Finance and Banking

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CFTC Chair Behnam Testifies On Regulation Of Digital Belongings


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 In testimony earlier than the U.S. Senate
Committee on Agriculture, Vitamin and Forestry (the
“Committee”), CFTC Chair Rostin Behnam reviewed the
company’s regulatory oversight of digital property.

Mr. Behnam pointed to “regulatory gaps offered by
improvements within the monetary markets” and mentioned there may be not a
“viable substitute for a useful regulatory oversight
regime for the money digital asset market.” He described the
CFTC’s fraud and enforcement authority powers for addressing
misconduct within the regulation of money markets by way of (i) oversight
and surveillance applications, and (ii) different means, together with
whistleblower ideas or referrals. He said, nonetheless, that nobody
regulator has “adequate visibility” on this space to be
in a position to police conflicts of curiosity and misleading buying and selling
practices.

Mr. Behnam mentioned that whereas the CFTC’s foremost position is to
regulate the commodity derivatives market, there are some
traits of the digital asset commodity money market that
distinguish it from different money commodity markets. These
traits embrace the next:

  • the digital asset money market is essentially composed of retail
    traders, who’re primarily engaged in value hypothesis;

  • speculative fervor round digital property has led traders to
    tackle lots of leverage, main to cost volatility; and

  • complexities round securing and transacting in digital property
    have resulted in platforms shedding funds to hacks.

Mr. Behnam emphasised the necessity for extra sources to
deal with points surrounding digital property and decentralized
monetary applied sciences. He said that the CFTC is correctly
positioned to conduct oversight on this space, as its versatile
strategy to “ensur[ing] market integrity and vibrancy”
whereas additionally “making certain particular person buyer protections”
permits it to evolve together with the derivatives markets. With
respect to the dimensions of the digital asset market, he highlighted
that 13% to 14% of Individuals are invested in digital property, and
that “the most important U.S. digital asset alternate reported an
enhance from 2.1 million to 7.4 million month-to-month customers” in
2021.

Moreover, in a letter to the Committee, Mr. Behnam
reiterated the difficulties that might come up whereas regulating the
digital asset market, stressing the variations between digital
property and conventional commodities and the way that might have an effect on future
regulation.

Mr. Behnam asserted the need of taking giant coordinated
federal measures, whether or not that features working with the SEC or
contributing to the President’s Working Group Mission on
stablecoins, to correctly regulate the digital asset commodity
market. He anticipated that subsequent modifications on this space will
lengthen past the scope of the Commodity Alternate Act.

Commentary

The SEC’s strategy to the regulation of utility tokens is
essentially flawed in that it successfully disallows a product
that has doubtlessly very vital financial
worth. See  Cupboard Commentary: The Securities Legislation Remedy
of Utility Tokens
. Whereas the CFTC doesn’t appear the plain
regulator of those merchandise (versus the SEC), maybe
Congress will determine that it’s higher to empower a regulator to
oversee digital property slightly than one which appears inclined to
outlaw a lot of them.

Major Sources

  1. CFTC Public Assertion: Testimony of Chair Rostin
    Behnam relating to “Analyzing Digital Belongings: Dangers, Regulation,
    and Innovation”

  2. CFTC Chair Rostin Behnam: Letter to the U.S.
    Senate Committee on Agriculture, Vitamin, and Forestry -
    “Analyzing Digital Belongings: Dangers, Regulation, and
    Innovation”

 

The content material of this text is meant to offer a normal
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