Markets
As US commodities regulator CFTC calls for swift action on cryptocurrencies, senators are still struggling
While Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said her latest legislative proposal to oversee cryptocurrency markets is headed to members of her panel this week, the committee’s top Republican said his meetings with the digital asset industry indicate that these companies still don’t like what they’re seeing.
“The frank and honest feedback we’ve received from these discussions does not lead me to believe that the level of support needed for this proposal to succeed currently exists among stakeholders, and people are working very hard to try to correct that,” Sen. John Boozman (R-Ark.), the top Republican on the panel, said in a statement. a hearing on Wednesday on the digital asset sector.
U.S. Commodity Futures Trading Commission (CFTC) chief Rostin Behnam echoed sentiments in his testimony that generally align with the view of crypto advocates: Congress has failed to produce a regulatory response to cryptocurrencies, which is hurting investors and putting the U.S. at a competitive disadvantage.
He said what “worried me most” about watching the growth of digital assets was the lack of action from Congress.
“I believe the most important thing I have done, and continue to do, is advocate for this agency to fill the regulatory gap,” Behnam told senators. “Congress must act quickly to ensure that regulators like the CFTC provide basic customer protections that are essential to U.S. financial markets.”
The senators who lead the Agriculture Committee, which oversees the CFTC, I worked for years in its own crypto legislation that would focus — more narrowly than other efforts — on granting the regulator authority to police spot trading in digital commodities. That category, which includes bitcoin (BTC) and which Behnam and others argue also includes Ethereum’s ether (ETH)represents the majority of cryptocurrency trading activity.
However, details of a current effort led by Stabenow have not officially emerged, and she indicated at the hearing that she hopes to share specific legislative language with the other panel members by the end of the week.
“We cannot afford to wait any longer to regulate these assets,” she told the hearing. “The time to act is now.”
Boozman called the hearing “a good start,” suggesting that his stated intention to continue working with Stabenow on new legislation is nowhere near the finish line.
The US House of Representatives has moved far ahead of the Senate in crypto legislative progress, having passed a far-reaching bill on market structure with a large bipartisan majority. But the industry has encountered more difficulties in the Senate, where prominent members such as Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) have criticized the dangers cryptocurrency poses to consumers. Brown’s Senate Banking Committee has so far failed to advance legislation, despite years of discussion on the topic.
“Some in this city are less interested in protecting consumers and investors than others,” Brown said at Wednesday’s hearing.
There is little time left in this session of Congress to address complex regulatory legislation, and the November elections will draw even more attention from lawmakers as that date approaches.
Behnam argued that not instituting federal rules on cryptocurrencies will not scare away investors.
“I do not believe that inaction will end public interest in digital assets; it will only result in greater risk for our financial markets and investors,” he said.
The CFTC chairman argued that any legislation should define how his agency and the Securities and Exchange Commission (SEC) will determine what is a digital commodity and what is a security. But Boozman said during the hearing that the committee should not go beyond its jurisdiction at the CFTC and into the workings of other regulators “that are not under our authority,” such as the SEC, the Treasury Department and the Federal Reserve.
The CFTC chief also said his agency’s current powers, which are largely limited to enforcement, are too reactive to be a useful deterrent to bad behavior in the industry.
“The goal of any comprehensive legislation on this is to prevent further fraud before it occurs and to reduce regulation through enforcement,” Christopher LaVigne, a partner at the law firm Withers, said in an email. “It was interesting to hear Chairman Behnam state his belief that enforcement of existing rules does not have the same deterrent effect that a comprehensive regulatory regime would have. It is hard to imagine [SEC] President [Gary] Gensler making such an admission.”
UPDATE (July 10, 2024, 16:32 UTC): Adds comment from a Withers attorney.