Regulation
Favorite Crypto Regulator Doesn’t Have Enough Teeth, Says US Senator – DL News
- The cryptocurrency industry would prefer the CFTC to be its watchdog.
- But lawmakers fear the agency would bite off “a lot more than it can chew.”
A Senate Appropriations Committee hearing on Thursday highlighted a question at the heart of US crypto regulation: Does the US derivatives watchdog have enough resources to police cryptocurrencies?
Lawmakers fear the Commodity Futures Trading Commission is “bigging off more than it can chew” in wanting to regulate cryptocurrency markets, said Democratic Senator Dick Durbin of Illinois.
Durbin spoke during a hearing held to consider funding for the CFTC and its sister agency, the Securities and Exchange Commission.
The SEC has far more resources than the CFTC. It’s a disparity that has bedeviled CFTC chairs in the past and has achieved new urgency now that Congress is seriously considering regulations tailored for cryptocurrencies.
CFTC Chairman Rostin Behnam responded to Durbin by saying his agency was “adequately equipped” to oversee the markets it has a mandate to oversee.
“But if we were given authority over the cryptocurrency markets, I would definitely expect an increase in the budget,” he added.
FIT law21
A bill passed by the House of Representatives in May would give the CFTC exactly that authority – though not a bigger budget – if it became law.
The cryptocurrency industry has hailed the FIT21 Act as a path towards a market structure tailored for cryptocurrency trading.
Join the community to get our latest stories and updates
In accordance with the wishes of many cryptocurrency industry players, the bill plans to establish the CFTC, rather than the SEC, as the primary regulator of the industry.
This has fueled concerns that the CFTC is underfunded.
Different financing models
On Thursday, SEC Chairman Gary Gensler asked the Appropriations Committee for $2.6 billion to fund the SEC for fiscal year 2025, which begins Oct. 1.
Behnam asked the committee for $399 million for fiscal year 2025.
The difference in their budgets is partly due to the SEC being a larger agency that oversees public securities markets, which has historically dwarfed the CFTC-regulated futures markets.
However, when Congress passed post-financial crisis legislation during the Obama years, the CFTC was given oversight of a large chunk of the swaps markets, without increasing its budget accordingly.
Furthermore, the SEC is partly self-funded, collecting fees from market participants that offset its costs to taxpayers.
CFTC the preferred regulator
However, the cryptocurrency industry lobbied for the CFTC to become its primary regulator, believing it to be more lenient.
Behnam, however, refuses to characterize his agency as relatively ineffective.
He told the committee on Thursday that his agency’s track record shows it can handle the cryptocurrency industry.
“In the last 10 years we have brought 135 cryptocurrency cases, we have raised billions of dollars [in penalties]and we have been able to successfully preside over a market where we have no direct authority and jurisdiction,” Behnam said.
He added that the CFTC’s failure to provide such assurance resulted in “rampant fraud and abuse in the markets and, ultimately, public distrust, lack of trust and loss of funds.”
Joanna Wright writes about cryptocurrency regulation for DL News. Contact her at joanna@dlnews.com.