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US lawmakers quiz CFTC on digital assets

31 March 2022

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The US House Agriculture Committee held a hearing on 31 March featuring Rostin Behnam, chairman of the US Commodity Futures Trading Commission, to discuss the agency's current priorities and upcoming work areas. The hearing, titled "The State of the CFTC," was dominated by questions related to the regulation of futures based on bitcoin and other digital assets.

In his opening statement, Behnam stated that the "derivatives industry's population is shifting, increasingly emerging from the technology sector rather than traditional finance." He also noted a recent influx of retail participants into the trading of futures. Behnam noted that this transformation "will not distract the CFTC" from ensuring that commercial end-users continue to have cost-effective access to regulated markets to manage risk.  

Several lawmakers questioned Behnam about the recent request from FTX, a cryptocurrency exchange, for an amended Derivatives Clearing Organization (DCO) registration order. FTX is proposing to offer direct clearing of margined futures, meaning that customers would connect directly to the DCO without having to use clearing firms as their intermediaries.

Representative David Scott, the Georgia Democrat who chairs the committee, expressed concerns about the FTX proposal and the broader implications for markets and intermediaries. Scott announced that he intends to call a hearing on 17 May to discuss the FTX proposal, and added that he will be inviting the CEOs of CME Group and Intercontinental Exchange, the two largest futures exchange operators in the US, to testify.

Ranking Member GT Thompson (R-Pa.) asked Behnam what steps the CFTC will take beyond soliciting public comments as it considers this and other proposals. Behnam said the agency plans to conduct a staff roundtable toward the end of May to have a conversation about non intermediation. Behnam also noted his belief that, regardless of what happens with the FTX proposal, he expects similar proposals to come in the future. Specific to FTX, Behnam would not commit to when the proposal might be voted on. 

Rep. Ann Kuster (D-N.H.) asked Behnam what customer protections would be needed for the digital asset market, given that the market is heavily retail focused. Behnam responded that as policymakers think about digital assets, they should apply core principles from the Commodity Exchange Ac. These include areas such as segregation of assets to ensure customers know that their assets are protected. 

Beyond digital assets, key areas of discussion at the hearing included the agency's focus on climate-related issues, the agency's funding needs, cyber risks, cross-border market access and recent commodity market volatility.

This was the second time this year Behnam has been called before US lawmakers to testify , the first being a February hearing before the US Senate Agriculture Committee that touched on similar topics.

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