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Crypto’s Favorite Regulator Doesn’t Have Enough Strength, Says US Senator – DL News
- The crypto industry would prefer the CFTC to be its watchdog.
- But lawmakers worry the agency is biting off “a lot more than it can chew.”
A Senate Appropriations Committee hearing on Thursday highlighted a central question of US crypto regulation: Does the US derivatives watchdog have enough resources to police cryptocurrencies?
Lawmakers fear the Commodity Futures Trading Commission “is biting off way more than it can chew” in wanting to regulate crypto markets, said Democratic Senator Dick Durbin of Illinois.
Durbin spoke during the hearing held to consider funding for the CFTC and its sister agency, the Securities and Exchange Commission.
The SEC has many more resources than the CFTC. It’s a disparity that has angered previous CFTC presidents and one that has taken on new urgency now that Congress is seriously considering custom regulations for crypto.
CFTC Chairman Rostin Behnam responded to Durbin by saying his agency was “adequately equipped” to oversee the markets it is mandated to oversee.
“But if we had authority over the crypto markets, I would certainly expect there to be an increase in the budget,” he added.
FIT21 Law
A bill passed by the House of Representatives in May would give the CFTC exactly that authority — though not a larger budget — if it became law.
The crypto industry hailed the FIT21 Act as a path towards a market structure adapted to cryptocurrency trading.
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In line with the wishes of many crypto industry participants, the bill contemplates anointing the CFTC, rather than the SEC, as the industry’s primary regulator.
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 due, in part, to the fact that the SEC is a larger agency that oversees government securities markets, which has historically overshadowed futures markets regulated by the CFTC.
However, when Congress passed post-financial crisis legislation during the Obama years, the CFTC was given a large portion of the swaps markets to oversee, without increasing its budget accordingly.
Furthermore, the SEC is partially self-funded, as it charges fees to market participants that offset its cost to taxpayers.
CFTC the regulator of choice
However, the crypto industry has been lobbying for the CFTC to be its main regulator, believing it to be more lenient.
Behnam, however, rejects the characterization of his agency as relatively toothless.
He told the committee on Thursday that his agency’s enforcement record demonstrates that it can handle the crypto industry.
“In the last 10 years, we have brought 135 crypto cases, raised billions of dollars [in penalties]and we have successfully policed a market where we do not have direct authority and jurisdiction,” said Behnam.
He added that the failure to grant this to the CFTC resulted in “rampant fraud and abuse in the markets and, ultimately, public distrust, lack of trust and loss of funds.”
Joanna Wright writes about crypto regulation for DL News. Contact her at joanna@dlnews.com.