Source: FOX Business
Translated by: BitpushNews
According to FOX Business, the incoming Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC) to grant it regulatory authority over a significant portion of the $3 trillion digital asset market.
This move is part of a broader effort by President-elect Donald Trump and the Congressional Republican majority to weaken the SEC's regulatory authority over the digital asset industry under President Biden and the soon-to-be-outgoing SEC chairman Gary Gensler.
The CFTC is often referred to as the 'little sister' of the SEC, with Congress authorizing it to regulate a $20 trillion U.S. derivatives market, including trading in futures, options, and physical commodities like gold, oil, and wheat.
Like the SEC, the CFTC has the authority to set market rules and initiate enforcement cases, but it is generally perceived that its regulatory approach is less stringent than that of the SEC, as the derivatives market is dominated by established institutional participants rather than small investors, making it seen as more adept at managing risk.
According to sources directly familiar with Trump's team's thinking, as Trump takes office and the influence of the cryptocurrency industry within Republican politics grows, the CFTC may expand its regulatory scope to include oversight of the spot markets for digital assets (such as Bitcoin and Ethereum) classified as commodities 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 spur innovation in cryptocurrency businesses, including potentially transformative blockchain technology that could eliminate costly intermediaries in commercial transactions.
Former CFTC chairman Christopher Giancarlo told FOX Business, ‘With sufficient funding and the right leadership, I believe the CFTC can begin regulating digital commodities on the first day of Donald Trump's administration.’
Granting the CFTC regulatory authority over the spot markets for Bitcoin, Ethereum, and other tokens considered digital commodities will also empower it to regulate the exchanges trading these assets. This move marks an important step towards providing regulatory clarity for companies and individuals involved in trading the two largest cryptocurrencies by market value, as currently no regulatory body has clear jurisdiction over these spot market trades.
The uncertainty surrounding the classification of digital assets and the reluctance of the SEC or CFTC 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 crackdown across the industry to reinforce his view that most cryptocurrencies, except for Bitcoin, are securities, which has made him and the SEC heavily criticized within the U.S. cryptocurrency industry and led the industry to lean towards the CFTC as the primary regulatory body.
The SEC did not immediately provide a comment.
Chris Giancarlo, also known as 'Crypto Dad,' served as CFTC chairman during Trump's first term and is currently considering taking on the role of 'Crypto Czar' in the new administration – a new position with not much detail so far, which, if authorized by Trump, would lead a group of cryptocurrency advisors and help implement cryptocurrency policies.
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, which oversees the CFTC, supporting the agency's authority over spot cryptocurrencies and emphasizing that its early involvement with digital assets dates back to 2015 when it classified Bitcoin as a commodity. Under Chris Giancarlo's leadership, the CFTC approved futures trading that tracks Bitcoin prices.
The 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 relying on enforcement.
Behnam stated that about 50% of the agency's enforcement actions this year were against cryptocurrency businesses, which is an 'astounding statistic' for an agency that has no regulatory power over 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 the SEC's – $400 million compared to the SEC's $2.4 billion – employing about 700 staff while the SEC has 5,300 employees.
While the idea of the CFTC playing a larger role in the regulation of digital commodities is a popular one within the cryptocurrency industry, many traditional CFTC commissioners are concerned that granting the agency unprecedented power over certain spot markets could extend to the regulation of physical commodities and agricultural products, which fall under the jurisdiction of other agencies like the Department of Agriculture.
Giancarlo indicated that if the CFTC is to regulate the spot markets for digital commodities, the relevant legislation must clearly define the CFTC's regulatory scope and authority to avoid issues of overregulation or underregulation.
Trump plans to allow the CFTC to strengthen its oversight of cryptocurrencies as part of a broader mission aimed at reshaping the relationship between the two main financial regulatory agencies, encouraging them to collaborate on certain cryptocurrency policies such as enforcing stablecoin regulations. Trump also aims to completely reform the internal culture of the SEC under Gensler’s three-year leadership. Gensler's rulemaking agenda and aggressive tendencies led to the departure of many senior officials, and discontented employee unions have frequently clashed with him.
‘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 an innovation agenda,’ Giancarlo said, who succeeded Gensler as CFTC chairman in 2017. Giancarlo had previously been a strong candidate to succeed Gensler as SEC chairman in the new administration, but he clearly told the Trump transition team he did not want to 'clean up the mess left by Gary Gensler' a second time.
It is currently 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 securities market worth $100 trillion, including stocks, bonds, mutual funds, and treasury bills.
‘The SEC's structure is great, but whoever leads the next SEC will need excellent policy capabilities and outstanding management skills to make it a part of the administration's agenda again,’ Giancarlo said.
