The incoming Trump administration aims to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it regulatory authority over a significant portion of the $30 trillion digital asset market.
Written by: 1912212.eth, Foresight News
Trump is set to officially take office on January 20, 2025, following his election victory this month, and a series of personnel changes are underway. The newly announced cabinet members include several cryptocurrency enthusiasts, such as Vice President J.D. Vance, Treasury Secretary Scott Bensinger, and Commerce Secretary Howard Lutnick, which may also lead to changes in the regulatory powers of the SEC and CFTC that are directly related to the crypto space.
On November 27, according to Fox, the incoming Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC), granting it regulatory authority over a significant portion of the $30 trillion digital asset market.
With current SEC Chairman Gary Gensler set to leave, what is Trump's intention in planning to expand the CFTC's regulatory authority over the crypto market at this time?
The CFTC is authorized by the U.S. Congress to regulate the $20 trillion U.S. derivatives market, including futures, options, and the trading of physical commodities such as gold, oil, and wheat. Like the SEC, the CFTC has the authority to establish market rules and take enforcement actions, but because the derivatives market is primarily dominated by mature institutional investors rather than retail investors, it is generally considered to be more lenient in regulation compared to the SEC and is better at managing risk.
The SEC, as another important regulatory body, is primarily responsible for overseeing the securities market, including stocks, bonds, mutual funds, and government bonds, with the main goal of protecting investor interests, especially those of retail investors.
In the past, the SEC has classified most cryptocurrencies as securities and included them within its jurisdiction, applying strict regulations to the crypto market. Recently, the SEC announced that its enforcement actions for the fiscal year 2024 reached a historic high, with 583 enforcement actions initiated, while securing $8.2 billion in financial remedies. This year alone, the cryptocurrency sector has faced numerous lawsuits involving exchanges like Kraken, Ripple, market makers like Cumberland, Crypto.com, Opensea, Consensys, and others.
In contrast, the CFTC has often taken a more open and friendly approach to emerging markets and new technologies. For example, the CFTC approved Bitcoin futures trading in 2017. However, there has been a regulatory power dispute between the CFTC and SEC regarding whether many tokens in the crypto market are commodities or securities.
CFTC Chairman Behnam has stated, "BTC and ETH have been recognized by the courts as digital commodities, and 70%-80% of the crypto market is non-securities." This suggests that part of the regulatory authority should belong to the CFTC and be primarily responsible for oversight. However, SEC Chairman Gary Gensler has made it clear on multiple occasions that securities laws apply to most crypto assets, and the SEC has the authority to regulate the crypto market.
Currently, the SEC remains in a dominant position in various lawsuits.
Neither agency has established clear and specific rules for the crypto space, instead opting to regulate the crypto market through enforcement actions. For instance, CFTC Chairman Behnam has indicated that about 50% of the agency's enforcement actions this year are directed at cryptocurrency companies.
While this has curbed some fraud and violations to a certain extent, it has also faced criticism and condemnation from various organizations and many professionals in the crypto industry.
Looking ahead, the Trump administration hopes to provide a clearer and more stable regulatory framework for the cryptocurrency market by expanding the CFTC's powers.
The CFTC may be responsible for regulating digital assets, including Bitcoin and Ethereum, which are considered commodities, along with their spot markets, while the SEC continues to oversee those crypto assets classified as securities. This division could help reduce market uncertainty, improve regulatory efficiency, and minimize regulatory overlap and conflict between the SEC and CFTC. As a highly anticipated crypto-friendly president, the final decisions made by Trump after taking office remain to be seen, but the regulatory policies and frameworks promoted under his administration may become clearer, thereby facilitating market development.
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