Regulation
CFTC’s Behman Calls on Congress to Act Quickly on Digital Commodity Regulations
Behnam
The Hagstrom Report
Commodity Futures Trading Commission Chairman Rostin Behnam has asked the Senate Agriculture Committee to “act swiftly” to give the agency regulatory authority over digital commodities, also known as cryptocurrencies.
“What has concerned me most throughout the expansion of this digital asset class is that while everyday Americans are falling victim to one digital asset scam after another, there is still no comprehensive legislative response,” Behnam testified. “Members of Congress have repeatedly asked me what I am doing to protect their constituents. I think the most important thing I have done, and continue to do, is to support this body to close the regulatory gap. Congress must act quickly to ensure that regulators, like the CFTC, provide basic customer protections that are critical to U.S. financial markets.”
Behnam noted that half of the agency’s enforcement efforts are now focused on cryptocurrencies, but said its limited enforcement powers are inadequate to address the cryptocurrency industry.
Behnam’s testimony was warmly welcomed by Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., and Sen. John Boozman, R-Ark., the committee’s ranking member. Stabenow noted that she and Boozman “have been steadfast in our efforts to advance bipartisan legislation that would give the CFTC regulatory authority over digital commodities.”
Perhaps responding to criticism that he should focus on the farm bill, Stabenow added, “We have a lot of important work to do this year in the committee, and I am committed to building bipartisan coalitions both here and on the farm bill so that together we can craft good legislation that supports and protects our collective constituents.”
During the hearing, Stabenow also noted that he met with House Agriculture Committee Chairman Glenn “GT” Thompson, R-Pa., and told him that the House bill “demeans commodities in the Midwest.”
Boozman said Congress needs to “get it done” with a farm bill, but “we have a real difference of opinion” on how to get it done.
“Everyone is negotiating in good faith,” he added.
On the subject of regulating digital assets, Stabenow explained that he believes “blockchain technology can help us manage data and move money in more efficient and transparent ways, but these goals cannot be achieved without comprehensive federal legislation. Our counterparts around the world recognize this, and the United States must, too. But most importantly, we owe it to the American public to protect them from malicious actors who exploit digital assets for personal gain at the expense of their customers.”
Stabenow said the legislation must include “similar rules for similar risks,” protect retail customers and provide adequate and permanent funding for the CFTC to oversee the digital commodities market.
She noted that the House passed a bill that “takes a slightly different approach,” but said she was “confident that we can come together to pass legislation that brings greater integrity to the cryptocurrency market.”
In his opening statement, Boozman said, “The President has drafted legislation that would give the CFTC the authority to regulate spot trading in digital commodities. We have had many, many conversations, and my staff has worked closely with his team on his proposal over the past several weeks. I am committed to continuing to work in good faith on legislation to give the CFTC the authority it needs.”
Boozman added, “Digital commodities and the regulatory issues they raise are complex and not well understood. I believe we have a responsibility as a committee to help educate our colleagues and the public on these issues, and I would like us to do more to better understand what policies are needed and why. I hope today’s hearing begins to fill that gap.”
Boozman also explained that “he believes we need to have broad support within the community we wish to regulate if we are to ultimately protect consumers and innovation. My staff and I have had numerous meetings with those who would be covered by the proposed legislation. The frank and honest feedback we have received from these discussions does not lead me to believe that the level of support necessary for this proposal to succeed currently exists among stakeholders, and people are working hard to try to correct this situation.”
The issue of jurisdiction between the CFTC and the Securities and Exchange Commission was raised during the hearing, with Boozman saying, “It is critical that we limit our policy proposals to the agencies over which we have jurisdiction, in this case the CFTC.”
The CFTC needs additional regulatory powers to be proactive rather than reactive, he said.
In his testimony, Behnam said, “Given the important role the Securities and Exchange Commission plays in overseeing security-based digital tokens, the Committee should consider a disciplined and balanced framework for determining tokens as commodities or securities under existing law.”
Behnam also emphasized the importance of adequate funding for the CFTC to take on the added responsibility of regulating cryptocurrencies. Behnam said, “A permanent pay-for-performance model, assessed solely on digital asset registrants and commensurate with the responsibilities outlined in a bill, is critical. As with other pay-for-performance models, congressional appropriations and the agency should work in tandem to establish budget levels and then set fees to meet those budget levels.”
Sen. Ben Ray Lujan, D-N.M., said the bill should address cryptocurrency financiers involved in importing fentanyl into the United States.
Behnam testified that “it is essential that the legislation provide comprehensive anti-money laundering, know-your-customer and customer identification program authority, building on existing requirements for market participants.”
Sen. Joni Ernst, a Republican from Iowa, asked Behnam how the agency is handling the Supreme Court decision that ended the Chevron doctrine of giving federal agencies deference in drafting regulations for vague laws. Behnam said the CFTC is “reviewing the decision” and reviewing the rules to determine whether lawsuits are likely to be filed against them. But she added that she believes the CFTC needs “a certain amount of discretion” to manage changing markets.
Iowa Republican Sen. Chuck Grassley asked Behnam if he supported permanently authorizing funding for the CFTC’s whistleblower program, and Behnam said yes.