FTX derivatives proposal takes center stage at Congressional hearing with CFTC chairman

A leader of US financial regulation has defended his agency's work with crypto exchange FTX in a Congressional hearing, which will apparently be the subject of yet another hearing in May. 

Rostin Behnam, the chairman of the Commodity Futures Trading Commission, appeared before the House Agriculture Committee on March 31 in a hearing entitled "The State of the CFTC."

In a notable moment, committee chairman David Scott (D-GA) said he was "very concerned" about "a proposal pending at the CFTC by a cryptocurrency exchange that is seeking approval to operate a new and untested system of clearing derivative trades." 

Scott was referring to FTX's push for a new means of clearing derivatives, without the intermediation of futures commission merchants.

"I would just assure you and this committee that as we are considering and contemplating the FTX proposal that we are doing it cautiously, we are doing it deliberately and patiently," Behnam responded. "Despite the novelty, as chairman, I feel I have the responsibility to give every stakeholder and every market participant an opportunity to share their views and to present their ideas that they have to the market."

The CFTC chairman continued: 


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"In many respects, this proposal could be a turning point or an inflection point for market structure. I don't know that. I don't believe that right now, necessarily, but I do think I have to consider the proposal in case there is a possibility for a new market structure that could provide innovation, provide more efficient markets, better pricing, better hedging tools."

The CFTC opened up FTX's proposal to public comment three weeks ago, a period that the commission has expanded from 30 days to 90 days. 

Scott did not appear convinced.

"This needs far more review. It needs more oversight," he concluded. Scott then announced that the committee will hold another hearing on May 17 to focus specifically on the FTX proposal. 

Scott also sits on the House Financial Services Committee, which hosted testimony from FTX CEO Sam Bankman-Fried in December. Fried, one of the biggest donors to President Biden's 2020 campaign, has become a go-to representative of the crypto industry on Capitol Hill in recent months.

Today's hearing takes place in the wake of the White House's budget proposal for 2023, which puts forward appropriations for executive agencies including the CFTC. Behnam has previously cited the expansion of the CFTC's work with crypto as a basis for a massive boost in resources. 

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Kollen Post is a senior reporter at The Block, covering all things policy and geopolitics from Washington, DC. That includes legislation and regulation, securities law and money laundering, cyber warfare, corruption, CBDCs, and blockchain’s role in the developing world. He speaks Russian and Arabic. You can send him leads at [email protected].