U.S. Congressional Hearing | Digital Asset Regulatory Agency? SBF Supports CFTC and Warns 95% of Trading Volume is Outside the U.S.

The U.S. Senate held a hearing on the 9th to discuss the regulation and innovation of digital assets. One major focus was: who should oversee digital asset affairs? SBF reminded Congress that 95% of cryptocurrency trading volume is "offshore volume," and a clear regulatory framework is needed to bring this liquidity and business back to the U.S.

The Senate hosted a hearing on "Examining Digital Assets: Risks, Regulation, and Innovation", inviting participants such as CFTC (Commodity Futures Trading Commission) Chairman Robin Behnam, FTX founder Sam Bankman-Fried, Global Blockchain Business Council CEO Sandra Ro, and Blockchain Trade Association founder Perianne Boring to discuss.

One of the key points of discussion was: "Who should oversee digital asset affairs?"

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What are the issues with the regulatory framework in the United States?

Since the eruption of the crypto market into the mainstream, the chaotic regulatory framework in the United States has been the biggest challenge in crypto regulation.

Within the U.S. regulatory ecosystem, the primary regulatory bodies for the spot market and derivatives market are separate. The SEC (Securities and Exchange Commission) oversees the spot market (cash securities market), while the CFTC is the regulatory body for derivatives.

Aside from the confusion caused by separate regulation, the classification of some tokens as securities in the spot market is also a major challenge, leading to unclear division of responsibilities and inconsistent standards in crypto regulation.

Addressing this, FTX founder Sam Bankman-Fried expressed in a previous hearing that such a regulatory framework would result in inefficiencies.
However, there are differing opinions within the crypto industry on how to resolve this issue.

Coinbase exchange advocates for the creation of a new federal regulatory body by the U.S. government to oversee cryptocurrency affairs.

On the other hand, FTX proposes allowing crypto market platforms to choose a regulatory body to act as the primary regulator for spot and derivatives markets, following a cooperative framework, while another would serve as a secondary regulatory body with influence over crypto platforms but not bear daily regulatory responsibilities.

Who should oversee digital asset affairs?

In response to this issue, CFTC Chairman Robin Behnam stated in his testimony at a hearing that he believes the CFTC has played a greater role in regulating Bitcoin and Ethereum markets to control manipulation or fraudulent activities, thus providing market protection for investors and aiming for the CFTC to lead digital asset regulation.

However, achieving this requires enhancing the CFTC's regulatory powers.

Robin Behnam stated, "Presently, digital asset markets are regulated through 'money transmission licenses,' which poses many challenges for the CFTC. In my view, the current regulatory framework lacks some 'critical principles,' especially in the retail market."

Robin Behnam also urged Congress to legislate to increase the CFTC's authority and budget to oversee the rapidly growing crypto market. He hopes Congress will increase the annual budget from $300 million to at least $1 billion.

"We understand market structure, know how to monitor the market, and can execute well."

The issue is that SEC Chairman Gary Gensler holds a similar view, believing that the SEC should lead crypto regulation because most tokens can be classified as "securities."

Gary Gensler told CNBC last month, "There are thousands of projects essentially raising money from the public to support their new ventures. This behavior is not problematic; it can be called an innovative way of financing, but the issue is, these tokens need to be regulated under securities laws."

SBF Warns: 95% of Trading Volume Occurs Outside the U.S., Urging Faster Regulatory Action

FTX founder SBF agrees with the statements made by the CFTC chairman during the hearing.

SBF supports expanding the CFTC's responsibilities in the crypto derivatives market and suggests that Congress should establish a registration process for digital currencies in the U.S. to increase regulatory clarity. He believes that 95% of crypto trades occur outside the U.S., and enhancing regulatory clarity is essential to bring back this liquidity and crypto business to the U.S.

"Although most of the intellectual property of the crypto industry is registered in the U.S., 95% of the trading volume occurs overseas. In other words, most of the crypto assets, including trading liquidity and crypto businesses, are not under U.S. jurisdiction. Being able to bring back liquidity, business, and other aspects to the U.S. would be positive for the government."