The incoming Trump administration hopes to expand the authority of the Commodity Futures Trading Commission (CFTC), granting it significant regulatory power over a large portion of the $30 trillion digital asset market.
Written by: 1912212.eth, Foresight News
Trump is set to officially take office on January 20, 2025. Following his election victory this month, a series of personnel changes are also underway. According to the newly announced cabinet members, several are cryptocurrency holders, including Vice President J.D. Vance, Treasury Secretary Scott Bensinger, and Commerce Secretary Howard Lutnick, which may also bring changes to the regulatory powers of the SEC and CFTC that are directly related to the crypto field.
On November 27, according to Fox News, the incoming Trump administration hopes to expand the authority of the Commodity Futures Trading Commission (CFTC), granting it significant regulatory power over a large portion of the $30 trillion digital asset market.
The current U.S. SEC Chairman Gary Gensler is about to leave office. Why is Trump planning to expand the CFTC's regulatory authority over the crypto market at this time?
The CFTC is authorized by the U.S. Congress to regulate the $20 trillion U.S. derivatives market, including futures, options, and trading in physical commodities such as gold, oil, and wheat. Like the SEC, the CFTC has the authority to set market rules and take enforcement actions. However, since the derivatives market is mainly dominated by mature institutional investors rather than retail investors, it is generally considered to be more lenient in regulation compared to the SEC and is better at managing risks.
The SEC, as another important regulatory agency, is primarily responsible for regulating the securities market, including stocks, bonds, mutual funds, and government bonds, with the main goal of protecting investors' interests, especially those of retail investors.
In the past, the U.S. SEC has regarded most cryptocurrencies as securities and brought them under its jurisdiction, treating the regulation of the crypto market quite strictly. The SEC recently announced that the enforcement efforts for fiscal year 2024 have reached a historic high, with a total of 583 enforcement actions initiated, while obtaining $8.2 billion in financial remedies. This year alone, the cryptocurrency sector has been embroiled in numerous lawsuits with institutions such as exchanges Kraken, Ripple, market maker Cumberland, Crypto.com, Opensea, and Consensys.
In contrast, the CFTC often holds a more open and friendly attitude towards emerging markets and new technologies. For instance, the CFTC approved Bitcoin futures trading in 2017. However, the CFTC and SEC have had regulatory power disputes over whether many tokens in the crypto market are commodities or securities.
CFTC Chairman Behnam has stated, 'BTC and ETH have been confirmed as digital commodities by the court, and 70%-80% of the crypto market is non-securities.' This undoubtedly means that part of the regulatory power should belong to the CFTC and be primarily responsible for regulation. However, SEC Chairman Gary Gensler has clearly stated on multiple occasions that securities laws apply to most crypto assets, and the SEC has the authority to regulate the crypto market.
Based on the current various litigation cases, the U.S. SEC still plays a leading role.
Currently, both departments have not formulated clear and specific rules in the cryptocurrency field, but are more inclined to regulate the crypto market through enforcement actions. For example, CFTC Chairman Behnam stated that about 50% of the agency's enforcement actions this year are aimed at cryptocurrency companies.
While this has, to some extent, cracked down on many fraud and illegal activities, it has also faced criticism and condemnation from various organizations and many practitioners in the crypto industry.
At present, the Trump administration hopes to provide a clearer and more stable regulatory framework for the cryptocurrency market by expanding the CFTC's authority.
The CFTC may be responsible for regulating digital assets such as Bitcoin and Ethereum, which are considered commodities, and their spot markets, while the SEC continues to regulate those crypto assets deemed to be securities. This distinction helps reduce uncertainty in the market, improve regulatory efficiency, and minimize regulatory overlap and conflicts between the SEC and CFTC. As a highly anticipated crypto-friendly president, Trump's final decision after taking office is unknown, but the regulatory policies and frameworks pushed for under his administration may be more defined, thereby promoting market development.
