Article source: BitPush
Source: FOX Business
Original title: Trump admin eyes CFTC to lead digital asset regulation
Compilation: BitpushNews
According to FOX Business, the incoming Trump administration wants to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it regulatory authority over a significant portion of the $30 trillion digital asset market.
This move is part of a broader effort by President-elect Donald Trump and the Republican majority in Congress to weaken the SEC's partial regulatory authority over the digital asset industry under President Biden and outgoing SEC chairman Gary Gensler.
The CFTC is often referred to as the 'little sister' of the SEC, as Congress authorized it to oversee the $20 trillion U.S. derivatives market, which includes futures, options, and trading of physical commodities like gold, oil, and wheat.
Like the SEC, the CFTC has the authority to establish market rules and file enforcement cases, but it is generally perceived to have a lighter regulatory approach than the SEC, as the derivatives market is dominated by established institutional participants rather than small investors, making it seen as better suited to manage risk.
According to sources with direct knowledge of Trump team's thinking, as Trump takes office and the influence of the crypto industry in Republican politics grows, the CFTC may expand its regulatory scope to include the spot markets for digital assets seen as commodities (like Bitcoin and Ethereum) and related exchanges.
More than 50 million people hold digital assets, but key figures in the incoming Trump administration believe that regulatory relief is needed to stimulate innovation in the cryptocurrency business, including potentially transformative blockchain technologies that can eliminate costly intermediaries in commercial transactions.
Former CFTC Chairman Chris Giancarlo told FOX Business: 'If there is sufficient funding and the right leadership, I believe the CFTC could begin regulating digital commodities on the first day of Donald Trump's administration.'
Granting the CFTC regulatory authority over the spot markets of Bitcoin, Ethereum, and other tokens viewed as digital commodities will also empower it to regulate the exchanges trading these assets. This move would mark a significant step toward providing regulatory clarity for companies and individuals participating in the trading of the two largest cryptocurrencies by market capitalization, as currently, no regulatory agency has clear jurisdiction over these spot market transactions.
The uncertainty surrounding the classification of digital assets and the SEC or CFTC's unwillingness to establish specific rules has led both agencies to regulate the space through enforcement actions. Under Gensler's leadership, the SEC led a three-year industry-wide crackdown to reinforce his view that most cryptocurrencies, except Bitcoin, are securities, which has drawn criticism for him and the SEC within the U.S. crypto industry and led the industry to favor the CFTC as the primary regulator.
The SEC did not immediately comment.
Chris Giancarlo, also known as 'Crypto Dad,' served as CFTC chairman during Trump's first term and is currently considering a role as 'Crypto Czar' in the new government—a position that is new and has not yet been detailed, which would help implement cryptocurrency policy if Trump authorizes it to lead a group of cryptocurrency advisors.
He has long called for his former agency to play a larger role in the regulation of digital currencies. In 2022, Chris Giancarlo wrote to the Senate Agriculture Committee overseeing the CFTC, supporting the agency's authority over spot cryptocurrencies and emphasizing its early involvement in digital assets dating back to 2015, when it recognized Bitcoin as a commodity. Under Chris Giancarlo's leadership, the CFTC approved futures trading linked to Bitcoin prices.
Biden's outgoing CFTC chairman, Rostin Behnam, requested additional funding from the Agriculture Committee during a supervisory hearing in July to begin more effectively regulating the cryptocurrency market rather than through enforcement.
Behnam stated that about 50% of the agency's enforcement actions this year are against cryptocurrency firms, which is an 'astounding statistic' for an agency without the power to regulate the industry.
The additional funding that Congress ultimately needs to approve is crucial for the CFTC to begin regulating fraud and oversight in the spot cryptocurrency market.
The agency's operating budget for 2024 is more than five times less than that of the SEC—$400 million compared to the SEC's $2.4 billion—they employ about 700 staff, while the SEC has 5,300 employees.
While the idea of the CFTC playing a greater role in the regulation of digital commodities is a welcome one for the cryptocurrency industry, many traditional CFTC commissioners are concerned that granting the agency unprecedented power over certain spot markets could encroach on the regulation of physical and agricultural products, which fall under the jurisdiction of other agencies like the Department of Agriculture.
Giancarlo stated that for the CFTC to regulate the spot market for digital commodities, relevant legislation must clearly define the CFTC's regulatory scope and authority to avoid issues of over-regulation or under-regulation.
Trump plans to allow the CFTC to strengthen oversight of cryptocurrencies, as part of a broader mission to restructure the relationship between the two major financial regulatory agencies and encourage them to collaborate on certain cryptocurrency policies, such as enforcing stablecoin regulations. Trump also wants to overhaul the internal culture of the SEC under Gensler's three-year leadership. Gensler's rule-making agenda and aggressive tendencies have led to many senior officials leaving, and discontent among staff unions has been ongoing.
'The SEC has a lot of work to do—many top talents have left, so we need to get it back on track and refocus its mission on supporting innovation,' Giancarlo said, who succeeded Gensler as CFTC chairman in 2017. Giancarlo was a leading candidate to succeed Gensler as SEC chairman in the new government but made it clear to Trump’s transition team that he did not want to 'clean up the mess left by Gary Gensler a second time.'
It is still unclear who Trump will appoint to lead the next SEC, but sources close to the transition team indicate that support for cryptocurrency is not the only trait being considered for candidates. In addition to cryptocurrency, the SEC is also responsible for regulating a $100 trillion securities market, including stocks, bonds, mutual funds, and government securities.
'The structure of the SEC is great, but whoever leads the next SEC needs outstanding policy capabilities and excellent management skills to make it a part of the administration's agenda again,' Giancarlo said.