CFTC, SEC at odds over crypto regulation – what now?

On Oct 3, 2023

SEC chair has said that existing laws in the country were sufficient for crypto regulation.
Both the regulators have also contended over the classification of different cryptocurrencies as either securities or commodities.

Reiterating his previous position, U.S. Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam stressed the need to urgently lay down a comprehensive regulatory framework for crypto assets in the U.S. He highlighted that there is a need to update policy frameworks in order to regulate virtual assets more adequately.

Behnam also said that he has consistently highlighted the need for Congress to bring legislative clarity to address the lack of regulation over the crypto commodity market.

Behnam made these remarks while delivering the keynote address at the Futures Industry Association Expo 2023 on 2 October.

It is evident that the position of the CFTC Chair stands in stark contrast to that of the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler. Gensler has again and again maintained that existing securities laws in the country are sufficient to regulate the industry.

Existing laws legislated in “essentially another era”

The CFTC Chair underlined that the Commodity Exchange Act (CEA) of 1936 was legislated in “essentially another era.”

Therefore, its limits create “real barriers” in policy regulation and enforcement in the current era which is witnessing a set of new financial technologies such as decentralized finance (DeFi).

Behnam’s position on crypto regulation is very unlike that of SEC Chair. Gensler believes that the existing legislation “has been quite a benefit to investors and economic growth over the last 90 years.” Therefore, there is no need to change it.

The SEC Chair reiterated the same views during the recent House Committee hearings also.

Behnam informed that the CFTC’s Division of Enforcement has obtained penalty orders worth more than $6 billion in the past fiscal year. Among these, 45 orders were related to misconduct related to virtual assets.

He further informed that actions against illicit crypto activities accounted for over 34% of the 131 such actions initiated by his Commission since 2015.

The chasm between the two regulators also exists over the classification of different cryptocurrencies as either securities or commodities. Both the regulators have frequently contended over the issue of crypto regulation.

Behnam remarked while concluding his address,

“I have continued to advocate for additional authority in the crypto space.”

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