Can Crypto Industry Face Further Scrutiny? US Regulator Warns Of Oversight Gaps

Rostin Behnam, outgoing chair of the Commodity Futures Trading Commission (CFTC), has sounded the alarm on the need for oversight of digital assets. 

According to a 7 January 2025 FT report, Behnam emphasized that there are the risks posed by an unregulated crypto landscape.

“Over the past several years, a multitude of domestic and global events tested the resilience of all financial markets,” he wrote in his final note.

Today, I announced my departure from @CFTC. After more than seven years at the U.S. Commodity Futures Trading Commission, I will be stepping down from my position as Chairman on January 20th. My final day at the Commission will be Friday, February 7th. A 🧵

— Rostin Behnam (@CFTCbehnam) January 7, 2025

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Much Of The Crypto Spot Market Remains Outside CFTC’s Purview 

While the CFTC has jurisdiction over commodity derivatives markets, including Bitcoin futures, much of the crypto spot market remains outside its purview. 

However, in an interview, Behnam highlighted the need to address the lack of comprehensive regulation for cryptocurrencies. 

Behnam described this gap as a critical issue, given the increasing adoption of digital assets by both retail and institutional investors.

“You still have a large swath of the digital asset space unregulated in the US regulatory system,” Behnam stated. “It’s important—given the adoption we’ve seen by some traditional financial institutions and the huge demand for these products—that we fill this gap.”

Behnam argued that many digital assets qualify as commodities and should fall under the CFTC’s oversight. He called for Congress to grant the agency authority over cash markets for digital commodities, positioning the CFTC as a “natural fit” to regulate this sector.

It is worth noting that under Behnam’s leadership, the CFTC took harsh enforcement actions against major crypto players.

The agency’s lawsuit against Binance—the world’s largest cryptocurrency exchange—and its CEO Changpeng Zhao marked a watershed moment. The case alleged that Binance operated illegally in the US, circumventing compliance controls to maximize profits. This resulted in a $4.3 billion settlement. 

CFTC v/s SEC: A Turf War Over Crypto Oversight

The regulatory landscape for cryptocurrencies in the US is complicated by jurisdictional overlap between the CFTC and the Securities and Exchange Commission (SEC).

However, current SEC Chair Gary Gensler asserted that most digital tokens are securities subject to his agency’s rules.

This ongoing debate has created confusion among market participants and hindered efforts to establish clear regulatory guidelines.

Behnam has consistently advocated for legislative action to clarify these roles. He estimates that up to 70% of digital assets should be classified as commodities, leaving security tokens under SEC oversight. Recent legislative proposals aim to formalize this division, but progress has been slow amid political gridlock.

“When we have two agencies contradicting each other about whether one of the most utilized stablecoins is a security or a commodity, we end up with uncertainty,” noted Representative French Hill during a Congressional hearing on crypto regulation.

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Ongoing Leadership Changes At SEC 

Meanwhile, US President Elect- Donald Trump will have the opportunity to fill two vacant seats at the SEC: one previously held by Caroline Crenshaw and another by Commissioner Jaime Lizárraga (Democrat).

This reshuffling could result in a Republican-majority SEC that is more aligned with Trump’s campaign promise to make America “the crypto capital of the planet.”

The SEC is on the brink of a significant political and ideological transformation. The crypto industry’s successful lobbying efforts to block the renomination of Democratic Commissioner Caroline Crenshaw is proof!

The move, which effectively ends her tenure, underscores the growing influence of crypto advocacy groups in shaping regulatory policy.

Explore: SEC Reappointment Of Caroline Crenshaw Canceled By Senate Banking Committee

Disclaimer

Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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