The future of digital asset regulation? The CFTC, says Congressional committee

Within Congress, the Commodity Futures Trading Commission is picking up political momentum to regulate crypto markets directly. 

On June 23, a subcommittee of the House Agriculture Committee held a hearing on “the Future of Digital Assets Regulation.” That future, by all appearances, looks a lot like it belongs with the Commodity Futures Trading Commission. 

“Should the CFTC have direct statutory authority to regulate cash markets,” asked new subcommittee chairman Sean Maloney (D-NY). Maloney’s inquiry reflects a long-running lingering question in Washington: which regulator should take point on crypto?

“The CFTC is certainly up to the job,” answered Dr. Chris Brummer. “It obviously has to be financed and staffed properly.”

Brummer is a Georgetown Law Professor, host of the Fintech Beat podcast, and a longstanding commentator on crypto law in DC. He continued: “Irrespective of which regulator is in charge, that regulator will have to have a builder’s mentality.”

Since Rostin Behnam took over as chair of the CFTC, he’s been pushing for the legal green light from Congress to regulate crypto spot markets. 

Currently, the CFTC only has enforcement authority, which means they do not have running data on crypto exchanges. The new authority would entail a massive expansion for the CFTC — but it’s a change the crypto industry seems to be on board with, especially since Gary Gensler took over at the Securities and Exchange Commission and began dubbing all centralized crypto exchanges to be securities exchanges. 

Both the Senate and House Agriculture Committees have seemed receptive. Vocal exceptions today were Austin Scott (R-GA) and Bobby Rush (D-IL). But leadership seems united overall. 

“I think it’s an excellent agency and they’re very well-positioned from what they’re currently doing and what they could do in the future,” Maloney told The Block of the CFTC following the hearing. 

Glenn Thompson (R-PN), the ranking member of the full House Ag Committee, appeared at the hearing to plug his Digital Commodity Exchange Act, which would establish a voluntary national regime for CFTC registration. David Scott (D-NY), the full committee chair and a noted crypto critic, did not attend. Scott is thought to be suffering from poor health.

“I’ve heard criticism about the CFTC that it’s a permissive, light-touch regulator,” said ranking member Michelle Fischbach (R-MN). “Do you agree with that and if not, could you tell us some of your personal experiences as to why that criticism is unfounded?”

Given that Fischbach was directing her question to Vince McGonagle, a director at the CFTC, the response was, predictably, in the negative. 

But while this committee appears set to hand the CFTC more authority, few are willing to say overtly what many in the crypto space seem to assume this means: less authority for the SEC and, by extension, its oversight in Congress, the House Financial Services and Senate Banking Committees. 

“Overall it’s a big Washington-level conversation that transcends the CFTC, or the SEC, and frankly the Treasury Department, because it’s a transnational conversation,” Charles Hoskinson, a co-founder of Cardano and one of the witnesses, told The Block. 

The Block broke the news of today’s hearing last week.