The head of the US Commodity Futures Trading Commission told lawmakers on Wednesday his agency should take on a leading role in policing cryptocurrency.
Testifying before the Senate Agriculture Committee, CFTC Chairman Rostin Behnam said there was an urgent need for Congress to grant additional authority and resources to his agency to better monitor the rapidly growing digital currency market.
"In essence, this is an unregulated market," he said. "There is so much that we are not able to see because of this limited authority."
Behnam's comments follow a letter he sent on Tuesday to Congress, in which he 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.
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Lawmakers in Congress and the Biden administration are trying to set up a new regulatory structure for digital currencies, with the Securities and Exchange Commission also engaging in several projects to boost scrutiny of the new products.
"We can't afford to wait until the next crisis. Congress must work with regulators and the Biden administration to design a framework that protects consumers and our environment and keeps our markets fair, transparent and competitive," said US Senator Debbie Stabenow, chairwoman of the Senate Agriculture Committee. "The CFTC will play a key role in that effort."
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.
He 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.
US 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 US Treasury-led working group recommended Congress pass a law specifying stablecoins should be issued only by companies that have insured deposits, like banks.