Commodity Futures Trading Commission Chairman Rostin Behnam defended legislation backed by both himself and former FTX CEO Sam Bankman-Fried, arguing on Monday that if his agency gains authority over spot markets it will protect ordinary crypto investors because the agency can more easily clamp down on bad actors.
Behnam responded to a question on FTX and Bankman-Fried, who pushed for the same legislation Behnam supports to give the CFTC more power over crypto markets and exchanges.
The remarks were among the first Behnam's made since the crypto giant's collapse, and a preview of how he'll address the situation during a Senate hearing on the topic scheduled for Thursday.
The CFTC had no authority to supervise much of the FTX empire, he said. The legislation under consideration in the Senate would also increase transparency requirements for non-public exchanges, which would help ensure that they don't commingle client and company funds, as appears to have happened with FTX, Behnam added.
Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark., have pledged to continue to work on the legislation supported by both Behnam and Bankman-Fried, despite the scandal now surrounding what had been the industry's loudest voice on the issue. The embattled former FTX CEO has also since given an interview undercutting previous positive remarks about regulation.
Behnam, a former senior aide to Stabenow, stood by the legislation.
''I think it's important that we fill this regulatory gap before more harm is done to retail investors and institutional investors as well,'' he told a Financial Times crypto asset conference.
Benham argued that it would allow for more direct supervision, since the agency could require crypto exchanges, broker-dealers and other players to register if they dealt in digital commodities, with bitcoin being the most clearly defined under that rubric.
The CFTC chair also spoke on decentralized finance protocols. He expressed concern the technology created a gap between the regulator and the licensed firm.
''There has to be some relationship between the regulator and the entity or the organization,'' he said. The regulator needs to know what is going on, whether it is people or a code that is operating an organization, and how trades with customers are being facilitated.
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