In congressional testimony on Thursday, September 15, US Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam urged US senators to pass a bill that would explicitly give the CFTC broad regulatory oversight of the cryptocurrency market. His comments are the latest in a string of regulators grappling with questions about whether they have jurisdiction over the emerging, and fast-growing, cryptocurrency market.
While he noted that the legislation wasn’t perfect — and said it was a “step in the right direction” — Chairman Behnam’s comments suggest that regulatory agencies would strongly prefer that their jurisdiction on this matter be made explicit via direct congressional action. Such a stance is not a surprise, given that proposed regulations on crypto have resulted in significant pushback from the industry, with promises to tie up proposed regulations in administrative lawsuits if passed and instead advocate for a new regulatory regime tailored to crypto. If Congress were to pass a law giving the CFTC or SEC the authority to regulate the cryptocurrency market, however, regulators would be on far more solid ground.
Chairman Behnam’s comments largely reflect the position of SEC Chairman Gary Gensler. Although he has made some comments indicating that he wants the SEC to engage in rulemaking to regulate crypto, to date, the SEC’s jurisdiction has been slowly built through one-off enforcement actions. However, Gensler has consistently advocated for new statutes to give the SEC jurisdiction in this area. On Thursday, Chairman Gensler reiterated his position, highlighting his concern that many common cryptoassets (such as stablecoins) and cryptocurrency transactions (including ICOs), as well as many aspects of the cryptocurrency market infrastructure (including trading, lending and decentralized finance (DeFi) platforms), all implicate federal securities laws and SEC regulations, in addition to separately implicate federal commodity laws; however, he also noted that any future crypto regulations could be years away. In the meantime, even if the bill passes as drafted, the lack of SEC regulations addressing the “security” aspects of cryptoassets, transactions, and market infrastructure will mean that the full scope of the SEC’s jurisdiction will continue to be built by iterative enforcement actions that is slowly building a precedent to guide both regulators and players in the cryptocurrency market.
The uncertain regulatory and statutory outlook presents both problems and opportunities for the cryptocurrency market. On the one hand, the lack of regulation or congressional action means that the decentralized finance, or DeFi, market can continue to engage with and develop its products, at least for the time being, within a more lax regulatory landscape than its centralized counterparts. financial counterparties. On the other hand, with no clear law on this issue, players in the cryptocurrency space can face major headaches, as they have far less legal guidance than those trading in traditional securities. These circumstances underscore the important role that outside counsel can play in helping companies and individuals continue to innovate and succeed in the cryptocurrency market while seeking to minimize litigation and regulatory risk.
CFTC chief urges congressional action on crypto while SEC chief says crypto regulation is ‘years away’
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