Blockchain
As US commodities regulator CFTC urges swift action on cryptocurrencies, senators are still reeling
While Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said her latest legislative proposal to oversee cryptocurrency markets is coming to her committee this week, the committee’s top Republican said his meetings with the digital asset industry indicate those 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 that is necessary for this proposal to succeed among stakeholders currently exists, and people are working hard to try to correct this,” said Sen. John Boozman (R-Ark.), the panel’s top Republican, in a hearing on Wednesday on the digital business sector.
U.S. Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam echoed sentiments in his testimony that generally align with the view of cryptocurrency advocates: Congress has failed to provide a regulatory response to cryptocurrencies, harming investors and leaving the U.S. at a competitive disadvantage.
He said what “concerned me most” in watching the growth of digital assets was the lack of action from Congress.
“I think the most important thing I’ve ever done, and continue to do, is to advocate for this agency to close the regulatory gap,” Behnam told senators. “Congress needs to act quickly to ensure that regulators like the CFTC can provide the basic customer protections that are essential to U.S. financial markets.”
The senators who head the Agriculture Committee, which oversees the CFTC, I worked for years on its own cryptocurrency legislation that would focus — more narrowly than other efforts — on granting the regulator authority to oversee spot trading of digital commodities. That category, which includes bitcoin (BTC) and which Behnam and others argue also includes Ethereum ether (ETH)represents the majority of cryptocurrency trading activity.
However, details of the current initiative led by Stabenow have not yet officially emerged, and she said during the hearing that she hopes to share specific legislative language with other committee members by the end of the week.
“We cannot afford to wait any longer to regulate these assets,” he said at 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 not over yet.
The U.S. House of Representatives has far outpaced the Senate in cryptocurrency legislative progress, having passed a far-reaching bill on market structure with a large bipartisan majority. But the industry has faced more difficulty in the Senate, where prominent members such as Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) have criticized the dangers cryptocurrencies pose to consumers. Brown’s Senate Banking Committee has so far failed to make progress on the legislation, despite years of discussion on the topic.
“Some in this city are less interested in protecting consumers and investors than others,” Brown said during Wednesday’s hearing.
There is little time left in this session of Congress to address complex legislative action, and as the deadline approaches, the November elections will require even more attention from lawmakers.
Behnam argued that the lack of federal regulation on cryptocurrencies will not keep investors away.
“I don’t think inaction will stifle public interest in digital assets; it will only pose greater risk to our financial markets and investors,” he said.
The CFTC chairman argued that any legislation would have to define how his agency and the Securities and Exchange Commission (SEC) would determine what is a digital commodity and what is a security. But Boozman said during the hearing that the committee should not reach beyond the CFTC’s jurisdiction and into the work of other regulators “not under our authority,” such as the SEC, the Treasury Department and the Federal Reserve.
The CFTC chief also said that his agency’s current powers, which are largely limited to enforcement, are too reactive to be a useful preventative measure against bad behavior in the industry.
“The purpose of any comprehensive legislation on this is to prevent further fraud before it happens and 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’s hard to imagine [SEC] President [Gary] Gensler makes a similar admission.”
UPDATE (July 10, 2024, 16:32 UTC): Adds comment from a Withers lawyer.