Original author: 1912212.eth, Foresight News
Trump is set to be officially inaugurated on January 20, 2025, following his election victory this month, and a series of personnel changes are underway. New cabinet members announced include several who are cryptocurrency holders, including Vice President J.D. Vance, Treasury Secretary Scott Behnam, and Commerce Secretary Howard Lutnick, among others. This may bring changes to the regulatory authority of the SEC and CFTC, which are directly involved in crypto regulation.
On November 27, according to Fox News, the incoming Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it significant regulatory authority over a $30 trillion digital asset market.
With current SEC Chairman Gary Gensler set to leave office, why is Trump planning to expand the CFTC's regulatory powers over the crypto market at this time?
The CFTC is authorized by the U.S. Congress to regulate a $20 trillion U.S. derivatives market, including futures, options, and trading of physical commodities such as gold, oil, and wheat. Like the SEC, the CFTC has the authority to set market rules and take enforcement actions, but since the derivatives market is primarily 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, also an important regulatory agency, is primarily responsible for overseeing the securities market, which includes stocks, bonds, mutual funds, and government securities. Its main goal is to protect investor interests, especially those of retail investors.
In the past, the U.S. SEC has regarded most cryptocurrencies as securities and included them within its jurisdiction, treating the regulation of the crypto market quite strictly. Recently, the SEC announced that its enforcement efforts for the fiscal year 2024 have reached a historic high, initiating 583 enforcement actions while securing $8.2 billion in financial remedies. The crypto sector has faced numerous legal disputes this year with institutions such as Kraken, Ripple, market maker Cumberland, Crypto.com, Opensea, and Consensys.
In contrast, the CFTC tends to have 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 engaged in a power struggle over whether many tokens in the crypto market are commodities or securities.
CFTC Chairman Behnam has stated, "BTC and ETH have been recognized by the court as digital commodities, and 70% - 80% of the crypto market is non-securities." This undoubtedly implies that part of the regulatory authority should belong to the CFTC, which would be primarily responsible for regulation. However, SEC Chairman Gary Gensler has explicitly stated on multiple occasions that securities laws apply to most crypto assets, and the SEC has the authority to regulate the crypto market.
From the current lawsuits, the U.S. SEC still plays a leading role.
Currently, neither agency has established clear and specific rules for the crypto space; instead, they tend to prefer law enforcement actions to regulate the crypto market. For example, CFTC Chairman Behnam has stated that about 50% of the agency's enforcement actions this year are targeting cryptocurrency companies.
While this has somewhat curbed many scams and violations, it has also faced criticism and condemnation from various organizations and professionals in the crypto industry.
Currently, the Trump administration hopes to provide a more clear and stable regulatory framework for the cryptocurrency market by expanding the CFTC's powers.
The CFTC may be responsible for regulating digital assets considered commodities, such as Bitcoin and Ethereum, along with their spot markets, while the SEC continues to regulate those crypto assets deemed securities. This delineation helps reduce market uncertainty, improve regulatory efficiency, and minimize regulatory overlap and conflict between the SEC and CFTC. As an anticipated crypto-friendly president, Trump’s final decisions after taking office remain to be seen, but the regulatory policies and framework pushed by him may become clearer, thus promoting market development.
