Jun 6, 2023 - Economy

CFTC chair cites lack of clarity in need for new digital assets bill

CFTC Chair Rostin Behnam testifies before House Ag Committee hearing. Photo: Ting Shen/Getty

While one regulator continues its attempt to bring the crypto industry to heel by penalizing it, another regulator is emerging to take a different tack, and seize authority over digital assets.

Driving the news: Hours after Coinbase was sued by the Securities and Exchange Commission for breaking market rules, a House committee hearing on a discussion draft legislation for the regulation of digital assets kicked off.

Zoom in: Commodity Futures Trading Commission Chair Rostin Behnam, answering questions from the committee, nodded to the lack of clarity around digital assets that necessitated the regulatory framework in discussion.

Of note: He stopped short of commenting on the SEC's recent token analyses at the heart of the securities regulator's respective lawsuits against Binance and Coinbase.

  • Asked whether he agreed with it, Behnam demurred, pointing to pending litigation, but said: "This is why we're here," and "there is confusion."

The big picture: Crypto's biggest gripe is the lack of clarity around which tokens are securities, and which commodities — a taxonomy that regulatory agencies disagree on, crypto firms say.

  • Catch up quick: The SEC named 13 cryptocurrencies that Coinbase lists for trading in its suit this morning that the regulator considers securities, which the regulator often does when it brings enforcement actions against crypto firms.

The intrigue: "Hopefully we can resolve some of these differences in the future," Behnam said, referencing the SEC's position, reiterating the CFTC's stance that ether, for example, is a commodity.

  • The SEC has previously said otherwise.

Be smart: While the CFTC and the SEC wrestle for authority over regulating digital assets, they often say they aren't necessarily at odds, as the two regulatory agencies often work together.

What we're watching: Chair Benham estimated it would take one to two years to implement joint rulemaking if the agency received more funding, and double that time, without.

  • Benham said the CFTC would need $120 million in additional resources over three years to build rulemaking teams.
  • That would be roughly 10% more than its current annual budget of $365 million.

What others are saying: Meanwhile, Coinbase's legal counsel Paul Grewal per his prepared remarks for the hearing, said:

  • Congress needs to draw the lines between when digital assets "should be regulated as commodities, when they should be regulated as securities, and when financial regulations should not apply or simply would make no sense."

The bottom line: "This bill would be a major step in creating a clear rulebook that will make crypto safer for all Americans and help ensure the US continues to lead on technological innovation," he said.

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