REGULATION

CFTC Chair Continues to Defend Regulatory Bill in Congress, Saying it Could Prevent Bankruptcy Events Like FTX

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CFTC Chair Continues to Defend Regulatory Bill in Congress, Saying it Could Prevent Bankruptcy Events Like FTX

After the bankruptcy of FTX, the Chairman of the U.S. CFTC, Rostin Behnam, attended a Senate hearing for the first time yesterday. In addition to addressing how to handle the issues with FTX, he also called for continued legislation to allow the CFTC to regulate the cryptocurrency market.

Following FTX's bankruptcy filing, there have been many ripple effects, including the Digital Commodity Consumer Protection Act (DCCPA) advocated strongly by SBF. Rostin Behnam, the Chairman of CFTC who is also pushing for the DCCPA, appeared as the only witness at the Senate hearing after the collapse of FTX.

Rostin Behnam stated that in recent weeks, the cryptocurrency market has faced the least desirable outcome, revealing a severe lack of regulation in the cryptocurrency space. While the CFTC has many tools to help defrauded users, the process is lengthy and arduous, and sometimes not all funds can be recovered. Comprehensive regulation would allow us to protect users through a framework before fraud occurs.

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He urged for the continued promotion of the DCCPA legislation as a way to protect investors and prevent the collapse of the cryptocurrency market:

"Back in September, I stood before you in strong support of the DCCPA. This bill represents the professional expertise of CFTC colleagues, combined with close collaboration with some members of the SEC, establishing a regulatory framework similar to what the CFTC currently has for derivative financial products."

Even if Banned, Risks Will Return to the U.S.

Rostin Behnam believes that even if the U.S. government were to completely ban the cryptocurrency industry, pushing the industry to overseas markets and regulating it there, eventually the crypto market will bring risks back to the U.S. through retail and institutional investors.

Rostin Behnam used FTX as a negative example, stating that if Congress could establish a comprehensive regulatory framework centered on the crypto market, with criteria such as auditing financial disclosures, capital adequacy, and segregating user funds, it could effectively prevent crypto companies from misappropriating user funds.

Establishing regulation will also lead more crypto companies to move to the U.S.

He emphasized that LedgerX, under the CFTC's regulation, is one of the few FTX subsidiaries that has not filed for bankruptcy, demonstrating the necessity of CFTC regulation.

If the CFTC does not obtain congressional authorization for regulation, there will be loopholes in the current federal regulatory framework. The DCCPA does address these issues and would prohibit FTX from misappropriating user funds.

Collaboration Needed Between Two Regulatory Agencies

Although the CFTC has been emphasizing the legitimacy of its regulation of the crypto market, SEC Chairman Gary Gensler previously stated that, except for Bitcoin, almost all cryptocurrencies would fall under the category of securities.

According to a report by The Block, Gary Gensler mentioned that the DCCPA could make SEC's regulatory business more complex.

It has also been reported that the SEC has its own stance on crypto regulation, stating that if someone or an event raises funds from the public and the actions of the initiator, sponsor, or main entity lead the public to expect profits, this situation must fall within securities laws.

However, this does not mean that the CFTC and SEC will not cooperate. In fact, both have expressed willingness to collaborate, with the difference lying in how to incorporate their respective guidelines into the regulatory framework to protect users.

Hearing Testimony: https://www.agriculture.senate.gov/imo/media/doc/The Honorable Rostin Behnam Testimony.pdf