The Trump administration granted the CFTC authority over digital assets such as Bitcoin and Ethereum.

The CFTC's budget is five times that of the SEC, limiting its regulatory capabilities.

Former CFTC Chairman Giancarlo supports the CFTC leading cryptocurrency regulation and cites past interactions with digital assets.

The U.S. Commodity Futures Trading Commission (CFTC) will replace the SEC's role

During Biden's presidency, the SEC has faced significant criticism from the crypto market due to strict enforcement by courts and regulations. Last year, the commission charged crypto-related entities up to 46 times, a 53% increase over the previous year. According to a report by Cornerstone Research, this is also the highest number of lawsuits since the commission began overseeing cryptocurrencies in 2013.

Cryptocurrency exchanges like Binance and Coinbase are the main targets of SEC lawsuits, including cases against Zhao Changpeng (CZ) for operating an illegal exchange and violating securities laws. Coinbase is also facing the same lawsuit from SEC Chairman Gary Gensler, indicating that this is an unregistered exchange.

The CFTC will play a key role in a growing industry with 50 million traders and a $3 trillion market size. This move will also allow the commission to regulate cryptocurrency exchanges, companies, and individuals in specific markets.

Trump administration's cryptocurrency regulatory strategy

The Trump administration plans to replace the SEC's dominance in the digital asset space by expanding the powers of the CFTC. The CFTC already oversees a $20 trillion U.S. derivatives market, covering futures, options, and other financial derivatives, while digital assets are considered commodities rather than securities, thus the CFTC's regulation of these assets is more lenient. This contrasts sharply with the SEC's regulatory approach, which tends to strictly regulate the vast majority of cryptocurrencies (except Bitcoin) and treats them as securities.

The Trump administration's policies are backed by a strong 'deregulation' stance, especially when cryptocurrency technology is seen as a key driver of innovation. Former CFTC Chairman Chris Giancarlo (known as the 'father of cryptocurrency') recognized Bitcoin as a commodity back in 2015 and approved futures trading tracking Bitcoin prices. He is currently considering taking on a new role as 'cryptocurrency czar' under the Trump administration to help formulate policies that further strengthen the CFTC's regulatory role in the crypto market.

Comparison of SEC and CFTC regulation

In contrast to the SEC's relatively harsh regulatory approach, the CFTC's regulatory style is more lenient and flexible. The SEC typically carries out enforcement actions in the cryptocurrency market, while the CFTC tends to manage the market with regulatory rules. In recent years, SEC Chairman Gary Gensler has pushed for strict regulation of the crypto industry, leading to widespread criticism of his crackdown on the crypto market, especially as Gensler attempts to classify the majority of cryptocurrencies as securities and promote corresponding regulatory measures.

This situation has prompted the crypto industry to gradually lean toward supporting the CFTC as the primary regulatory body, believing that the CFTC's regulatory approach is more suitable for this emerging field. The CFTC is also gradually increasing its regulation of the crypto industry, particularly as enforcement actions against cryptocurrency businesses have accounted for 50% of its overall enforcement cases.

If the CFTC gains the authority to regulate the spot market for digital assets, it will bring a clearer regulatory framework to the crypto industry, helping market participants clarify risks and opportunities, thereby increasing the industry's maturity and investor confidence. However, whether this policy can be implemented smoothly will require Congressional approval and the improvement of relevant legislation.

In this process, the cryptocurrency industry should also be prepared to face potential regulatory challenges. Balancing innovation and regulation, as well as avoiding excessive or insufficient regulation, will be important issues for the industry and regulators to address.

This content is for reference only and does not constitute investment advice.

Work Statement: Content is for reference only and does not constitute investment advice.