Source: FOX Business
Original title: Trump admin eyes CFTC to lead digital asset regulation
Compiled by: BitpushNews
According to FOX Business, the incoming Trump administration aims to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it substantial regulatory authority over a large portion of the $3 trillion digital asset market.
This move is part of a broader effort by President-elect Donald Trump and the Republican congressional majority to weaken the U.S. Securities and Exchange Commission's (SEC) regulatory authority over the digital asset industry under President Biden and outgoing SEC Chairman Gary Gensler.
The CFTC is often referred to as the SEC's "little sister," with Congress authorizing it to oversee the $20 trillion U.S. derivatives market, which includes futures, options, and the trading of physical commodities like gold, oil, and wheat.
Like the SEC, the CFTC has the authority to set market rules and bring enforcement cases, but it is generally perceived to exert lighter regulatory pressure than the SEC because the derivatives market is dominated by mature institutional participants rather than small investors, and is therefore seen as better able to manage risk.
According to sources with direct knowledge of the 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 considered commodities (such as 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 crypto business, including potentially transformative blockchain technologies that could 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 can start regulating digital commodities on Day One of Donald Trump's presidency."
Granting the CFTC regulatory authority over the spot markets for Bitcoin, Ethereum, and other tokens regarded as digital commodities would also empower it to regulate the exchanges trading these assets. This move would mark an important step towards providing regulatory clarity for companies and individuals involved in trading the two cryptocurrencies with the largest market capitalization, as there is currently no regulatory body with clear jurisdiction over these spot market trades.
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 has led a three-year industry-wide crackdown to reinforce his view that most cryptocurrencies, except Bitcoin, are securities, which has made him and the SEC heavily criticized in the U.S. crypto industry, resulting in a tendency for the industry to favor the CFTC as the primary regulator.
The SEC did not immediately comment.
Chris Giancarlo, also known as the "Crypto Dad," served as the 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 that has not yet been detailed. If authorized by Trump, this position would lead a group of cryptocurrency advisors to help implement cryptocurrency policy.
He has long called on his former agency to take a greater role in the regulation of digital currencies. In 2022, Chris Giancarlo wrote to the Senate Agriculture Committee, which regulates the CFTC, supporting the agency's authority over spot cryptocurrencies and emphasizing that its early involvement in 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 the price of Bitcoin.
The outgoing CFTC Chairman Rostin Behnam asked the Agriculture Committee for additional funding during a supervisory hearing in July to begin regulating the cryptocurrency market more effectively rather than through enforcement.
Behnam stated that approximately 50% of the agency's enforcement actions this year were against cryptocurrency firms, which is an "astounding statistic" for an agency that lacks regulatory power over the industry.
The additional funding, which Congress will ultimately need to approve, is crucial for the CFTC to begin regulating fraud and oversight in the spot cryptocurrency market.
The agency's 2024 operating budget is more than five times smaller than the SEC's—$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 larger role in the regulation of digital commodities is popular in the cryptocurrency industry, many traditional CFTC commissioners are concerned that granting the agency unprecedented authority over certain spot markets could spill over into the regulation of physical and agricultural commodities, which fall under the jurisdiction of other agencies like the Department of Agriculture.
Giancarlo stated that if the CFTC is to regulate the spot markets 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 its oversight of cryptocurrencies as part of a broader mission to reshape the relationship between the two major financial regulatory bodies, encouraging them to cooperate on certain cryptocurrency policies, such as enforcing stablecoin regulations. Trump also hopes to completely reform the SEC's internal culture under Gensler's three-year leadership. Gensler's rule-making agenda and aggressive tendencies have led to the departure of many senior officials and ongoing conflicts with disgruntled employee unions.
"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," said Giancarlo, who succeeded Gensler as the CFTC chairman in 2017. Giancarlo had previously been a leading candidate to succeed Gensler as SEC chairman in the new administration, but he made it clear to the Trump transition team that 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 say that support for cryptocurrency is not the only characteristic being considered for candidates. In addition to cryptocurrencies, the SEC is also responsible for regulating the $100 trillion securities market, including stocks, bonds, mutual funds, and government securities.
"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 administrative agenda again," Giancarlo said.
