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US senators express support for expanded CFTC oversight in digital commodities markets

CFTC Chair Behnam testifies in support of bill before Senate Ag Committee

15 September 2022

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The US Senate Committee on Agriculture, which oversees the US Commodity Futures Trading Commission, held a hearing on 15 September to discuss the Digital Commodities Consumer Protection Act, a bipartisan legislative proposal that would grant the CFTC additional oversight over spot digital commodities markets.

The bill would expand the CFTC's regulatory jurisdiction to include spot digital commodity trading, and would require all digital commodity platforms to register with the CFTC. To fund this expanded jurisdiction, the CFTC would also be provided new authorities to impose a user fee on registered digital commodity platforms.

The general mood at the hearing was supportive of the bill. Witnesses and senators alike expressed concern over the lack of regulatory certainty in the crypto space, the importance of providing the CFTC greater authority to protect market participants, and the need for a better structure to support innovation in digital assets to keep the U.S. competitive in the space.

While it is unlikely that Congress will act on this legislation, given the upcoming midterm elections and a tight legislative calendar, the hearing demonstrates a growing consensus on Capitol Hill about expanding the authority of the CFTC related to digital commodities.

The first portion of the hearing featured roughly an hour of questions fielded by CFTC Chairman Rostin Behnam, who asserted that the CFTC is indeed the "right regulator" to charge with expanded crypto oversight to protect market integrity of the spot digital commodity space, as well as individual customers.

"The Commodity Exchange Act, and the rules that the Commission promulgates from the law, directly support customer protections – full stop, and without equivocation," Behnam said.

In the second part of the hearing, the committee heard from a group of private sector experts, including former CFTC chairman Heath Tarbert. Now serving as chief legal officer at Citadel Securities, Tarbert expressed his support for the bill as well as the notion of expanded CFTC oversight. He noted that "it is difficult, if not impossible, for established institutions like ours to participate and provide those benefits to a market where the regulatory landscape is uncertain, fragmented, and opaque."

The private sector witnesses also included Denelle Dixon, CEO of the Stellar Development Foundation, and Christine Parker, vice president and deputy general counsel at Coinbase. Both expressed general support for more regulatory clarity and transparency, but cautioned that the current version of the Digital Commodities Consumer Protection Act may still leave some uncertainty around how to define specific digital asset as either a security or commodity.

Former CFTC chairman Christopher Giancarlo did not attend the hearing, but submitted a letter to the Senate committee supporting the proposed Digital Commodities Consumer Protection Act and expanded CFTC oversight of crypto markets. "American consumers and financial innovators alike deserve the benefit of the CFTC's seven years of market supervision, expert analysis and product engagement in digital asset markets," he wrote.

The Digital Commodities Consumer Protection Act was introduced in August by Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.), who are the chairwoman and ranking member, respectively, of the Senate Agriculture Committee. A key feature of the legislation is that it would give the CFTC authority for the registration and supervision of digital commodity platforms and digital commodity intermediaries in spot markets, as is currently required in CFTC-regulated derivatives markets.

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