Regulation
Crypto’s Favorite Regulator Doesn’t Have Enough Bite, US Senator Says – DL News
- The crypto industry would prefer the CFTC to be its watchdog.
- But lawmakers worry the agency is taking on “way more than it can chew.”
A Senate Appropriations Committee hearing Thursday shed light on a question at the heart of U.S. crypto regulation: Does the U.S. derivatives watchdog have enough resources to police cryptocurrencies?
Lawmakers fear the Commodity Futures Trading Commission is “biting off a lot more than it can chew” in wanting to regulate crypto markets, Democratic Sen. Dick Durbin of Illinois said.
Durbin was speaking at the hearing held to examine 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 angered CFTC chairs and has taken on new urgency now that Congress is seriously considering crypto-friendly regulation.
CFTC Chairman Rostin Behnam responded to Durbin by saying his agency is “adequately equipped” to oversee the markets it is mandated to oversee.
“But if we had authority over the crypto markets, I would definitely expect 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 — but not a larger budget — if it becomes law.
The crypto industry has welcomed the FIT21 law as a path towards a market structure suitable for cryptocurrency trading.
Join the community to receive our latest stories and updates
In line with the wishes of many in the crypto industry, the bill plans to designate 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 October 1.
Behnam asked the committee for $399 million for fiscal year 2025.
The difference in their budgets is partly because the SEC is a larger agency that oversees the public securities markets, which have historically dwarfed the futures markets regulated by the CFTC.
However, when Congress passed post-financial crisis legislation during the Obama years, the CFTC was given oversight of a large portion of the swaps markets, without increasing its budget accordingly.
Additionally, the SEC is partly self-funded, as it collects fees from market participants that offset its cost to taxpayers.
CFTC, the preferred regulator
Still, the crypto industry has lobbied for the CFTC to be its primary regulator, considering it more lenient.
Behnam rejects, however, that his agency is characterized as relatively toothless.
He told the committee Thursday that his agency’s enforcement track record demonstrated it could handle the crypto industry.
“Over the last 10 years we have brought 135 crypto cases, we have brought in billions of dollars [in penalties]and we have managed to control a market over which we have no direct authority or jurisdiction,” Behnam said.
He added that failure to provide this amount to the CFTC resulted in “widespread 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.