Donald Trump’s incoming administration is mulling handing over the regulation of crypto exchanges and spot markets for cryptocurrencies deemed commodities to the Commodity Futures Trading Commission (CFTC).
The move would allow the CFTC to regulate a significant chunk of the $3 trillion digital asset market and enhance the commission's reach.
CFTC To Lead Digital Asset Regulation?
The move could drastically reduce the regulatory influence of the United States Securities and Exchange Commission (SEC). The SEC under Gary Gensler brought significant regulatory action against crypto firms. President-elect Donald Trump and his team believe the SEC’s enforcement action has slowed down crypto innovation in the United States, and a less stringent approach with a lighter touch is needed to drive innovation and facilitate growth.
“JUST IN: The Trump administration is eyeing the CFTC to oversee digital asset regulation, per FOX.”
If the CFTC is given regulatory control of crypto, it will be a significant win for the industry in the US. The agency is its preferred regulator thanks to its perceived lenient approach to crypto. Chris Giancarlo, former CFTC Chairman, said,
“With adequate funding and under the right leadership, I think the CFTC could hit the ground running to begin regulating digital commodities on day one of Donald Trump’s presidency.”
The former CFTC Chairman had tried to convince the Senate Agriculture Committee, which oversees the CFTC, to support its oversight of the spot crypto market by pointing to the regulator’s early engagement with Bitcoin (BTC), which it called a commodity in 2015.
A Perceived Lighter Touch
The CFTC oversees the $20 trillion US derivatives market, including trading of futures, options, and physical commodities like gold, silver, oil, and wheat. The CFTC establishes market rules and brings enforcement action against institutions flouting rules and regulations. However, it is perceived to have a lighter touch than the SEC. This is because the derivatives markets are dominated by institutions and are considered better equipped to manage risk.
CFTC Chairman Rostin Behnam, who has relatively moderate views on crypto, has also asked the Senate Agriculture Committee for extra funding to regulate the crypto market more effectively rather than enforcement action. The CFTC has a budget of $706 million, four times smaller than the SEC’s $3 billion for the 2024 financial year. The CFTC employs far fewer staff, 700, than the SEC’s 5300.
Around 50% of the CFTC’s enforcement actions have been brought against prominent crypto firms and businesses. SEC Chair Behnam has called this a staggering statistic for an agency not mandated to regulate the industry. Additional funding is crucial for the CFTC to begin policing fraud and manipulation in the spot crypto market.
The uncertainty around the classification of digital assets and the unwillingness of the SEC and CFTC to draft specific rules has led to both agencies regulating the crypto space through enforcement actions.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
