Source: FOX Business
Original title: Trump admin eyes CFTC to lead digital asset regulation
Compiled by: BitpushNews
The incoming Trump administration wants to expand the powers of the Commodity Futures Trading Commission (CFTC) to give it regulatory authority over a large portion of the $3 trillion digital asset market, FOX Business has learned.
The move is part of a broader effort by President-elect Donald Trump and the Republican majority in Congress to weaken some of the U.S. Securities and Exchange Commission’s (SEC) regulatory authority over the digital assets industry under President Biden and outgoing SEC Chairman Gary Gensler.
Often referred to as the SEC's "little sister," the CFTC is authorized by Congress to regulate the $20 trillion U.S. derivatives market, which includes trading in futures, options and physical commodities such as gold, oil and wheat.
Like the SEC, the CFTC has the power to set market rules and bring enforcement cases, but it is generally considered to have a lighter regulatory arm than the SEC because derivatives markets are dominated by sophisticated institutional players rather than small investors, and are therefore seen as better at managing risk.
With Trump in office and the crypto industry’s growing influence in Republican politics, the CFTC is likely to expand its regulatory reach to include overseeing spot markets for digital assets considered commodities, such as bitcoin and ether, and related exchanges, according to sources with direct knowledge of the Trump team’s thinking.
More than 50 million people hold digital assets, but key figures in the incoming Trump administration argue that looser regulations are needed to spur innovation in crypto businesses, including potentially transformative blockchain technology, which could cut out costly middlemen in business transactions.
“With adequate funding and the right leadership, I think the CFTC could start regulating digital commodities on day one of Donald Trump’s presidency,” former CFTC Chairman Chris Giancarlo told FOX Business.
Giving the CFTC oversight of spot markets for bitcoin, ethereum and other tokens considered digital commodities would also give it the power to regulate exchanges where those assets are traded. The move would mark a major step toward providing regulatory clarity for companies and individuals involved in trading the two largest cryptocurrencies by market value, as no regulator currently has clear jurisdiction over those spot market transactions.
Uncertainty surrounding the classification of digital assets and the reluctance of the SEC or CFTC to set specific rules has led both agencies to regulate the space through enforcement actions. Under Gensler, the SEC led a three-year industry-wide crackdown to reinforce his view that most cryptocurrencies other than Bitcoin are securities, which made him and the SEC a target of criticism in the U.S. crypto industry and led the industry to favor the CFTC as the primary regulator.
The SEC had no immediate comment.
Chris Giancarlo, aka “Crypto Dad,” who served as CFTC chairman during Trump’s first term, is currently under consideration for the role of “crypto czar” in the new administration — a new, so-far-sparsely-detailed position that would help enforce cryptocurrency policy if Trump authorizes the position to lead a group of cryptocurrency advisers.
He has long called on his former agency to play a larger role in digital currency regulation. In 2022, Chris Giancarlo wrote a letter to the Senate Agriculture Committee, which oversees the CFTC, supporting the agency's spot cryptocurrency authority and emphasizing that its early involvement in digital assets dates back to 2015, when it recognized Bitcoin as a commodity. Under Chris Giancarlo's leadership, the CFTC approved futures trading that tracked the price of Bitcoin.
Biden’s outgoing CFTC Chairman Rostin Behnam asked the Agriculture Committee for additional funding during an oversight hearing in July to begin regulating cryptocurrency markets more effectively, rather than through enforcement.
Benham said about 50% of the agency’s enforcement actions this year have been against cryptocurrency businesses, a “staggering statistic” for an agency that does not have the power to regulate the industry.
The additional funding, which Congress will ultimately need to approve, will be critical for the CFTC to begin policing the spot crypto markets for fraud and regulation.
The agency’s 2024 operating budget is more than five times smaller than the SEC’s — $400 million compared to the SEC’s $2.4 billion — and they employ about 700 people compared to the SEC’s 5,300.
While the idea of the CFTC taking a larger role in digital commodity regulation is a welcome one for the cryptocurrency industry, many traditional CFTC commissioners worry that giving the agency unprecedented power over certain spot markets could spill over into regulation of physical and agricultural commodities, which fall under the purview of other agencies like the Department of Agriculture.
Giancarlo said that if the CFTC is to regulate the spot market for digital commodities, then the relevant legislation must clearly define the CFTC’s regulatory scope and authority to avoid the problem of over- or under-regulation.
Trump plans to allow the CFTC to increase its oversight of cryptocurrencies as part of a broader mission to restructure the relationship between the two major financial regulators and encourage them to cooperate on certain cryptocurrency policies, such as enforcing stablecoin regulations. Trump also wants to overhaul the SEC's internal culture under Gensler's three-year leadership. Gensler's rulemaking agenda and radical tendencies led to the departure of many senior officials and constant clashes with dissatisfied employee unions.
"The SEC has a lot of work to do — a lot of the top talent has left, so we need to get it running again and refocus its mission on a pro-innovation agenda," said Giancarlo, who succeeded Gensler as CFTC chairman in 2017. Giancarlo had previously been the favorite to succeed Gensler as SEC chairman under the new administration, but he made it clear to the Trump transition team that he did not want to "clean up the mess left by Gary Gensler a second time."
It is not yet clear who Trump will appoint to lead the next SEC, but sources close to the transition team said that support for cryptocurrencies is not the only trait of candidates being considered. In addition to cryptocurrencies, the SEC is also responsible for regulating the $100 trillion securities market, including stocks, bonds, mutual funds, Treasury bonds, etc.
“The SEC has a great structure, but whoever leads the next SEC is going to need great policy skills as well as great management skills to make it part of the executive agenda again,” Giancarlo said.
