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As US Commodities Regulator CFTC Calls for Swift Action on Cryptocurrencies, Senators Remain Deadlocked
As Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said her latest legislative proposal to oversee crypto markets is headed to her panel members this week, the committee’s top Republican said his meetings with the digital asset industry indicate those companies don’t yet like what they’re seeing.
“The frank and honest feedback that we’ve received from those discussions does not lead me to believe that the level of support that is necessary for this proposal to be successful currently exists among stakeholders, and people are working very hard to try to rectify that,” Sen. John Boozman (R-Ark.), the ranking Republican on the panel, said in a statement. a hearing on Wednesday on the digital assets sector.
U.S. Commodity Futures Trading Commission (CFTC) Director Rostin Behnam echoed sentiments in his testimony that are generally consistent with cryptocurrency advocates: Congress has failed to produce a regulatory response to cryptocurrencies, harming investors and leaving the United States at a competitive disadvantage.
He said what “concerns me most” about watching the growth of digital assets is the lack of action from Congress.
“I think the most important thing I have done and continue to do is advocate with this agency to close the regulatory gap,” Behnam told senators. “Congress must act quickly so that regulators, like the CFTC, can provide customers with the basic protections that are at the heart of America’s financial markets.”
Senators leading the Agriculture Committee, which oversees the CFTC, I worked for years on their own cryptocurrency legislation that would focus — more narrowly than other efforts — on giving the regulator powers to control spot trading of digital commodities. That category, which includes bitcoin (BTC) and which, according to Behnam and others, also includes Ethereum’s ether (ETH)accounts for the majority of cryptocurrency trading activity.
However, details of Stabenow’s current effort have not yet been formally released, and she indicated during the hearing that she hoped to share specific legislative language with other panel members by the end of the week.
“We can no longer afford to wait to regulate these assets,” she said at the hearing. “The time to act is now.”
Boozman called the hearing a “good start,” suggesting that his stated intention to continue working with Stabenow on new legislation is not close to being finalized.
The U.S. House of Representatives has far outpaced the Senate in crypto legislative progress, passing a far-reaching bill on market structure with a large bipartisan majority. But the industry has faced more difficulty in the Senate, where prominent members such as Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) have criticized the dangers cryptocurrency poses to consumers. The Senate Banking Committee led by Brown has so far failed to advance legislation, despite years of discussion on the topic.
“There are some in this town who are less interested in protecting consumers and investors than others,” Brown said at Wednesday’s hearing.
There is little time left in this session of Congress to tackle complex regulatory legislation, and the November elections will draw even more attention from lawmakers as that date approaches.
Behnam argued that failing to enact federal rules on cryptocurrencies will not deter investors.
“I do not believe that inaction will stifle public interest in digital assets; it will only increase the risks to our financial markets and our investors,” he said.
The CFTC chairman said any legislation should define how his agency and the Securities and Exchange Commission (SEC) will determine what is a digital commodity and what is a security. But Boozman said at the hearing that the committee should not overstep the CFTC’s jurisdiction and interfere in the operations of other regulators “that are outside our purview,” such as the SEC, the Treasury Department and the Federal Reserve.
The CFTC chief also said his agency’s current powers, which are largely limited to enforcement, are too reactive to be an effective means of preventing bad behavior in the industry.
“The goal of any comprehensive legislation on this topic is to prevent more fraud before it happens and reduce regulation through enforcement,” Christopher LaVigne, a partner at the law firm Withers, said in an email. “It was interesting to hear Chairman Behnam state his belief that enforcement of existing rules does not have the same deterrent effect that a comprehensive regulatory regime would have. It is hard to imagine that happening.” [SEC] President [Gary] Gensler makes such an admission.
UPDATE (July 10, 2024, 4:32 p.m. UTC): Adds a comment from a Withers attorney.