WASHINGTON: The head of the U.S. Commodity Futures Trading Commission is pushing for his agency to take on a leading role in policing digital assets as lawmakers and Biden administration officials scramble to bring cryptocurrencies under the regulatory fold.
In a letter sent on Tuesday to the agriculture committees in the U.S. House of Representatives and Senate, CFTC Chairman Rostin Behnam emphasized the agency’s focus in mitigating risk to individual investors and promoting market integrity as core reasons why it should be a central player in any crypto regulatory regime.
“At the CFTC, we have seen that a regulatory regime focused on core principles can be successful in overseeing a wide variety of markets, and have no reason to think those same principles cannot be applied to digital asset markets,” he wrote.
Lawmakers in Congress and the Biden administration are trying to set up a new regulatory regime for digital currencies, with the Securities and Exchange Commission also engaging in several projects to boost scrutiny of the new products.
Behnam also suggested the participation of retail investors in digital asset markets highlights the urgency for comprehensive crypto regulations, noting that recent studies indicate the amount of retail participation in the digital asset futures market is “more than double” other futures markets.
“In my opinion, there are important principles missing from the current regulatory framework applicable to digital asset markets that we see in other federally regulated markets, particularly ones that primarily cater to retail investors,” said Behnam, who is set to testify to the Senate Agriculture Committee on Wednesday on the risks and regulation of digital assets.
Behnam added that the CFTC’s lack of authority to oversee digital asset markets could be contributing to increasing fraud within the space. Although the CFTC has previously levied charges against major crypto players including Bitfinex and Tether, Behnam said it has been hard for the agency to supervise crypto exchanges operating outside of the United States.
U.S. regulators have so far focused most of their crypto regulatory efforts on stablecoins, which are digital assets whose value is supposed to be pegged to traditional currencies. Regulatory officials have said stablecoins lack proper transparency around the stability of their reserves, making them susceptible to runs.
In November, a U.S. Treasury-led working group recommended Congress pass a law specifying stablecoins should only be issued by companies that have insured deposits, like banks.