In testimony before Congress on Thursday, September 15, U.S. Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam urged US senators to pass a bill that would explicitly grant the CFTC broad regulatory oversight over the cryptocurrency market. His remarks are the latest in a series of regulators who have struggled with questions whether they have proficiency in the emerging and rapidly growing cryptocurrency market.
While he noted that the legislation was not perfect – saying it was a “step in the right direction” – Chairman Behnam’s comments indicated that regulators would strongly prefer their jurisdiction in the matter be made explicit by direct action of Congress. Such an attitude comes as no surprise, given that the proposed crypto regulations have resulted in a significant industry backlash, with promises of tie proposed regulations to administrative lawsuits if they are adopted and instead plead for a new crypto-friendly regulatory regime. However, if Congress were to enact legislation granting the CFTC or SEC the power to regulate the cryptocurrency market, regulators would be on much firmer ground.
Chairman Behnam’s remarks largely echo the attitude of SEC Chairman Gary Gensler. Although he did some comments stating that he wants the SEC to engage in rulemaking to regulate crypto, to date, the jurisdiction of the SEC has been slowly built through ad hoc enforcement actions. Gensler has constantly advocated, however, for new laws to grant the SEC jurisdiction in this area. On Thursday, Chairman Gensler reiterated his position, noting his concern that many common crypto assets (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 involve federal securities laws and SEC regulations, in addition to involving separately the federal laws on raw materials; he also noted, however, that any future crypto regulations could be years. In the meantime, even if the bill passes as written, the lack of SEC regulation that addresses the “security” aspects of crypto-assets, transactions, and market infrastructure would mean that the full scope of the SEC’s jurisdiction would continue to be built through iterative application. actions that are slowly building a set of precedents to guide both regulators and cryptocurrency market participants.
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 and grow its products, at least for now, within a regulatory framework. more lax than that of their centralized market. financial counterparties. On the other hand, without a clear law on this issue, players in the cryptocurrency space may face major headaches, as they have far less legal advice than those who trade traditional securities. . These circumstances underscore the vital role outside attorneys can play in helping companies and individuals continue to innovate and succeed in the cryptocurrency market while trying to minimize litigation and regulatory risk.