Regulation
CFTC Wants Millions More to Police Cryptocurrencies as Cases Represent 50% of Caseload – DL News
- The chairman of the U.S. derivatives watchdog told lawmakers his agency needs more money to police cryptocurrencies.
- He was testifying as a senator previewed new cryptocurrency legislation.
The U.S. derivatives watchdog needs more power to oversee cryptocurrency markets and ensure investor safety, but it also needs more money, its chairman told Congress on Wednesday.
In the fiscal year that ended in April, about 50% of the enforcement actions taken by the Commodity Futures Trading Commission involved cryptocurrency companies, the agency’s chairman, Rostin Behnam, said.
This is “a staggering statistic for an agency that oversees trillion-dollar markets to have to allocate half of its resources to a market that it does not regulate and for which it receives no appropriated funds,” said Behnam, who spoke at a Senate Agriculture Committee hearing on Wednesday.
The CFTC, as a derivatives regulator, has limited authority over cryptocurrency spot markets.
Behnam told lawmakers that if the government decides to change that and give it full jurisdiction over cryptocurrencies, the CFTC would need more budget for staffing and cybersecurity.
If Congress passes the law, the CFTC would need an additional $60 million for the first year and about $35 million more for the second year, as new revenue from cryptocurrency registrants takes effect.
This figure is in addition to the CFTC’s regular budget.
In April, Behnam asked Congress for $399 million and 725 full-time employees to fund the agency’s normal operations through 2025.
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Committee Chairwoman Senator Debbie Stabenow called the hearing, during which she teased a new law on cryptocurrencies This would give the CFTC more authority over cryptocurrency spot markets.
Stabenow said the bill would emphasize retail investor protections and also seek to adequately fund the CFTC. He said it will be submitted to committee members for review by the end of the week.
Limited resources
Behnam welcomed the idea of cryptocurrency legislation.
“If you measure the cryptocurrency economy by market capitalization, over 70-80% of the market is non-securities, which means there is no direct federal oversight,” he said.
“So, despite what some might believe, this leaves a huge gap, a void, and ultimately customers are at risk of losing money.”
The comment may refer to Behnam’s colleague at the Securities and Exchange Commission, Gary Gensler, who believes that most cryptocurrencies can be adequately regulated under current securities laws.
Behnam said, however, that while the CFTC welcomes greater statutory authority, it will need adequate resources.
Limited powers
The CFTC’s limited mandate over spot cryptocurrencies means that while it has a powerful enforcement program (which has launched 135 actions against cryptocurrency firms over the past decade), Behnam said it can only retaliate in protecting investors.
“We are never able to be on the front lines of these situations. We are always just reactive to tips, complaints from individuals who have usually already been scammed,” Behnam said.
An adequate regulatory framework would require cryptocurrency industry companies to register with the CFTC, regardless of whether they are brokers, exchanges or custodians, and to submit to a rigorous reporting regime.
“These are the kinds of regulatory tools that allow us to eliminate, if not significantly reduce, fraud and market manipulation,” Behnam said.
Contact the author at joanna@dlnews.com.