The incoming Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it significant regulatory authority over a large portion of the $3 trillion digital asset market.
Written by: 1912212.eth, Foresight News
Trump is set to officially take office on January 20, 2025, and following his election victory this month, a series of personnel changes are 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, among others, while the SEC and CFTC, which have direct regulatory connections to the crypto field, may also experience changes in regulatory power.
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 large portion of the $3 trillion digital asset market.
Why is the current SEC Chairman Gary Gensler planning to expand the CFTC's regulatory authority over the crypto market at this time before leaving office?
The CFTC is authorized by the U.S. Congress to regulate the $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 than the SEC and better at managing risks.
The SEC, as another important regulatory body, is primarily responsible for overseeing the securities market, including stocks, bonds, mutual funds, and government bonds, with a main goal of protecting investor interests, especially those of retail investors.
In the past, the SEC has regarded most cryptocurrencies as securities and included them under its jurisdiction, maintaining a relatively strict regulatory approach to the crypto market. The SEC recently announced that its enforcement efforts for the fiscal year 2024 reached a historic high, with 583 enforcement actions taken, while securing $8.2 billion in financial remedies. In the crypto field alone, there have been numerous lawsuits this year with exchanges such as Kraken, Ripple, market maker Cumberland, Crypto.com, Opensea, Consensys, and others.
In contrast, the CFTC often maintains a relatively open and friendly attitude towards emerging markets and new technologies; for example, the CFTC approved bitcoin futures trading in 2017. However, there have been regulatory power disputes between the CFTC and SEC regarding whether many tokens in the crypto market are commodities or securities.
CFTC Chairman Behnam has stated, "BTC and ETH have been confirmed by the courts as digital commodities, with 70%-80% of the crypto market being non-securities." This undoubtedly implies that some regulatory authority 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.
Currently, in various lawsuits, the U.S. SEC still plays a leading role.
Currently, neither department has established clear and specific rules for the crypto field, but they tend to rely on enforcement actions to regulate the crypto market. For instance, CFTC Chairman Behnam has indicated that about 50% of the agency's enforcement actions this year are aimed at cryptocurrency businesses.
Although this has to some extent hit many scams and violations, it has also been criticized and condemned by various organizations in the crypto industry and many practitioners.
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, along with their spot markets, while the SEC continues to oversee those crypto assets regarded as securities. This division helps reduce market uncertainty, improve regulatory efficiency, and minimize the overlap and conflict between the SEC and CFTC. As a much-anticipated crypto-friendly president, Trump's final decisions after taking office remain unknown, but the regulatory policies and frameworks pushed by him may become clearer, thus promoting market development.
