The senses. Cynthia Lummis and Kirsten Gillibrand on June 7 introduced the Responsible Financial Innovation Act, a bipartisan bill that will create a comprehensive regulatory framework for digital assets. One section that has caught the attention of many observers is that the bill assigns regulatory authority over digital asset spot markets to the Commodity and Futures Trading Commission (CFTC).
The senators said in a statement that “most digital assets are much more like commodities than securities, so the bill gives the CFTC clear authority over applicable digital asset spot markets, which is well in line with their current jurisdiction in other commodity markets. Digital assets that meet the definition of a commodity, such as bitcoin and ether, which account for more than half of the market capitalization of digital assets, will be regulated by the CFTC.
For other digital assets considered securities, the Securities and Exchange Commission (SEC) would have authority.
In light of this potential expansion of the CFTC’s powers to oversee digital assets, the credit house’s subcommittee on commodity exchanges, energy, and agriculture committee held a hearing on June 23. with CFTC Market Surveillance Division Director Vince McGonagle to learn more about the agency’s capabilities. on this space.
Early on, McGonagle declared not only the agency’s ability to oversee digital assets, but also that the agency has jurisdiction to do so.
“Digital assets have been broadly determined by the CFTC and federal courts to be commodities under the Commodities Exchange Act,” he said in his testimony, adding, “The CFTC exercises broad regulatory oversight on all futures, options and swaps listed by designated contract. markets”.
He also explained how, since 2017, the CFTC has regulated exchange-traded futures contracts on digital assets, particularly with bitcoin derivative contracts for trading.
McGonagle also said he wanted to leverage the good relationship the agency seems to have with the crypto community and the transparency it has provided, as opposed to the SEC, which has been criticized by the crypto community.
On this issue, and speaking of early digital asset contracts, he noted, “although the commission did not… solicit public comment at the time. , the CFTC has released two documents as part of these self-certification submissions to provide the public with general information about the CFTC’s oversight and approach to virtual currency futures markets. A few months later, in 2018, …staff clarified their priorities and expectations when considering new virtual currency derivatives to be listed on a designated contract market or to be cleared by a derivatives clearing organization.
The second point underlined by McGonagle was that the agency is capable of carrying out enforcement actions and not just regulatory or surveillance tasks. Many wrongdoings in the crypto space are related to fraud or manipulation, and the CFTC has actively investigated and addressed this type of misconduct, he argued.
Since 2014, the CFTC has “aggressively exercised its enforcement power by initiating more than 50 enforcement actions,” he said. More recently, in 2021 and 2022, the agency filed retail fraud charges and allegations of making false or misleading statements regarding digital assets.
The final point he made was to prove that the agency responds well when given new responsibilities. He referenced 2010, when Congress tasked the CFTC with creating a system to monitor the OTC swap market after the 2008 financial crisis and how, through the agency’s work, the swap market benefits henceforth of “transparency, reinforced customer protections and promotion of competition.
While McGonagle didn’t specifically ask for more powers for the CFTC to oversee digital assets, he did send the message that if Congress decided to do so, the agency would be ready.
Read more: Bill giving CFTC regulatory control would reshape crypto