Issues surrounding cryptocurrencies are consuming the Commodity Futures Trading Commission’s resources, with its chairman Rostin Behnam once again urging lawmakers to pass legislation that would give the agency new authorities over the sector.
More than 49% of CFTC enforcement actions in fiscal year 2023 were related to digital assets, and the market continues to grow, Benham said Wednesday during testimony before the House Agriculture Committee .
“It’s a staggering statistic that a market that we don’t directly regulate takes up half of our enforcement work and it’s not just Enforcement Division resources that are consumed,” Behnam told the legislators. “We need experts from different divisions to put together a case.”
Behnam also highlighted the recent increase in the value of cryptocurrencies and the optimism of retail investors, calling it a “cautionary note”.
“We need a regulatory structure,” Behnam said. “It’s not about legitimizing technology. It’s about protecting Americans and investors.”
The House Agriculture Committee and the House Financial Services Committee worked last summer to move the Financial Innovation and Technology for the 21st Century Act out of their committees. The bill would move further accountability to the CFTC and would require regulators to create a clear path for a digital asset to move from the status of an investment security to that of a commodity.
“I think this notion of crypto disappearing is just a false narrative and it would not be an understatement to suggest that there is another period of irrational exuberance underway with these price swings and volatility ” said Behnam. “It just reinforces the fact that we need to act, Congress needs to act to close this gap, particularly around bitcoin, which I think is clearly a commodity.”
Is the bill too premature?
Other lawmakers said they fear the bill is premature given that experts seem confused on how to define centralized and decentralized and the CFTC is already heavily focused on crypto enforcement.
“You have an industry that in the last three years alone has lost $2 trillion in market capitalization, 60 percent lost,” said Rep. Greg Casar of Texas. “It’s really volatile, so that worries me when we really need to protect farmers and ranchers and take care of oil and wheat. This other industry where some of these experts say we can’t even really define this what is decentralization, I “Don’t worry about the creation of the CFTC or the American people risking failure.”
Behnam said his focus would still be traditional commodity markets, but cited an increase in the value of crypto as demonstration that there is “real persistent adoption and demand from Americans to invest in this active “.
“We need to act, this is consuming a huge amount of our resources because there is so much fraud in the public space,” Behnam said.
Prometheus
Behnam was also asked during Wednesday’s hearing whether ether was a security or a commodity. Behnam has said ether is a commodity, while his fellow regulators at the Securities and Exchange Commission have not been as clear.
This comes as crypto platform Prometheum received a special purpose broker’s license from the SEC last year and announced last month that its ssubsidiary, Prometheum Capital LLC, will provide custody services for ether.
“I’m concerned that the SEC will use this as an opportunity to circumvent Congress and even the CFTC in this area to further confuse participants who are already in the field,” Rep. Zach Nunn, R-Iowa, said Wednesday.
Behnam said earlier in the hearing that he had not been in communication with Prometheum, but said it was an independent decision by the company to hold ether and not a decision by the SEC.
“How this plays out is obviously very critical,” Behnam said. “If the SEC takes action to essentially validate this decision, that is, establish ether as a security, then that would put our registrants, our exchanges that list ether as a futures contract, in some way in non-compliance with SEC rules, as opposed to CFTC rules.”
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