By decreasing the SEC's role and seeking clearer crypto control, the Trump administration intends to transfer Bitcoin and Ethereum regulation to the CFTC.
Reportedly, the Trump administration is contemplating giving the CFTC more control over the cryptocurrency sector, particularly Bitcoin and Ethereum. The idea calls for the Commodity Futures Trading Commission (CFTC), which has long been responsible for commodities and derivatives, to take the lead in overseeing digital assets, reducing the role of the Securities and Exchange Commission (SEC).
Since cryptocurrencies like Bitcoin and Ethereum are more closely resemble commodities than securities, this plan calls on the CFTC to regulate their spot markets. The combined market capitalization of these two cryptocurrencies is at $2.24 trillion, or 70% of the total. Many in the cryptocurrency sector welcome the CFTC's softer regulatory stance, seeing it as a chance to lower innovation hurdles. According to "Crypto Dad," a former chair of the CFTC, Christopher Giancarlo, the agency could start regulating digital commodities right away given enough money and leadership to take on a more expansive role.
With this move, the SEC is expressing its displeasure with the enforcement-driven strategy implemented by departing Chair Gary Gensler, who has drawn criticism for harshly cracking down on cryptocurrency companies. On top of that, it lines up with Republican goals of cutting red tape and encouraging new ideas. Harmonizing the regulatory framework and resolving the protracted disagreement over the classification of digital assets as securities or commodities might be achieved by shifting control to the Commodity Futures Trading Commission (CFTC).
Some cryptocurrency companies have relocated their operations abroad due to the disjointed regulatory landscape caused by years of jurisdictional disputes between the SEC and the CFTC. Cryptocurrencies are seen as commodities by the CFTC, but securities by the SEC. Uncertainty caused by this discrepancy has hindered the industry's expansion.
The goal of the "BRIDGE Digital Assets Act," a bill that has Republican and Democratic sponsors, is to encourage collaboration between the two departments. A joint advisory council consisting of twenty members from the private sector to coordinate regulatory measures is proposed under the legislation, with Tennessee Congressman John Rose serving as its chairman. The existing enforcement-driven paradigm is criticized in the bill for allegedly discouraging innovation in the United States and encouraging investment from elsewhere.
While previously asserted the agency's power over Ethereum, CFTC Chair Rostin Behnam has already shown an interest in wider crypto regulation. Possible conflicts between the SEC and the CFTC over the planned amendments include the latter's 2023 categorization of all Proof-of-Stake tokens as securities and the former's view of Ethereum as a commodity.
The prospect of the CFTC taking the initiative has been warmly received by the crypto community. In contrast to the SEC, the agency is often seen to be more supportive of crypto innovation. No longer will the SEC be able to stifle the cryptocurrency business," one commenter said. Since institutions are better able to manage risk, the CFTC takes a more measured approach.
Still, there are obstacles. The SEC has a $2.4 billion budget and 5,300 people, whereas the CFTC has just 700 workers and a budget of $400 million. If the CFTC wanted to keep an eye on the cryptocurrency spot market, it would need a lot more money and manpower. Traditional CFTC constituents, such agricultural commodities merchants, have also been the target of criticism over the possible effect. To ensure bipartisan support, it is necessary to address these challenges in the legislation wording.
Clearer rules for the cryptocurrency business and investors, as well as fewer disputes between authorities, might result from the change in regulatory emphasis. If put into action, the CFTC-led framework has the potential to be a game-changer in the fight against regulatory ambiguity and for the expansion of the bitcoin industry in the United States. The CFTC is expected to play a pivotal role in the potential reshaping of digital asset regulation brought about by the Trump administration's strategy and the bipartisan legislation.
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