Recently, CFTC Chairman Rostin Behnam announced that an Illinois court has confirmed Bitcoin (BTC) and Ethereum (ETH) as digital commodities under the Commodity Exchange Act. This statement comes amid ongoing debates about the regulatory classification of cryptocurrencies. Behnam highlighted that 70-80% of assets in the crypto market are non-securities. This stance contrasts with SEC Chairman Gary Gensler’s earlier assertion that most cryptocurrencies are securities.
Fox reporter Eleanor Terrett reported that during a Senate hearing, Behnam emphasized the distinct nature of digital assets compared to traditional asset classes, stressing their unique challenges regarding cybersecurity and operational resilience. This sentiment was echoed by Senator Cory Booker, who criticized the reliance on the SEC and CFTC to regulate the crypto market, which he described as “rife with abuse.” According to Booker, nearly 50% of all litigations dealt with by the CFTC are related to crypto, which is a significant burden on an agency mainly dealing in trillion-dollar traditional markets.
Lessons from Crypto Frauds
Senator Sherrod Brown questioned Behnam on the lessons learned from prior digital assets frauds. Behnam acknowledged the rapid evolution of digital technology and the need for the CFTC to adapt its regulatory approach accordingly. Senator Roger Marshall raised the issue of the ongoing jurisdictional tussle between the SEC and CFTC, suggesting that placing all digital assets under the CFTC’s purview might be simpler. Behnam expressed willingness to oversee the crypto market but noted that such a shift would require redefining what constitutes a security and a commodity.
The hearing also saw participation from House Subcommittee on Digital Assets Chairman Rep. French Hill and Senator Peter Welch, who stressed the importance of proper conduct in addressing these regulatory challenges. Senator Tommy Tuberville brought up the issue of taxing cryptocurrency miners, questioning the fairness of IRS policies that tax miners regardless of profitability. Behnam admitted he had not closely examined this issue but agreed that urgent attention needs to be paid to encouraging participation in the crypto space without undue harassment.
Behnam also noted the importance of regulating centralized exchanges on a priority basis, implying that although decentralized finance (DeFi) has regulatory issues, it should be treated uniquely. He added that the SEC and CFTC work together to enforce but do not have coordinated regulation frameworks which shows that law-making needs to come in to bring clarity and safety for market players.
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