Rostin Behnam, Chairman of the U.S. Commodity Futures Trading Commission (CFTC), spoke during an invite-only cryptocurrency event at Princeton University. He highlighted the dangers of an unregulated crypto market and the need for legislation. Also, Bitcoin and Ethereum comments surprised. Here are the details…
CFTC Chairman criticized for FTX talk
After FTX’s collapse this month, Behnam came under criticism for his ties to the exchange. cryptocoin.com Sam Bankman-Fried, the former CEO of the bankrupt FTX exchange, as we reported, said that his company had talked to the commission for “tens of thousands of hours”. The subject of his speech was that the CFTC allowed trading with money borrowed directly through FTX instead of a broker. The CFTC was also ready to enact what is called the Digital Commodities Consumer Protection Act (DCCPA), backed by Bankman-Fried. Behnam described the law as a “big step forward” in September.
Behnam’s remarks on Wednesday came at DeCenter, a blockchain institute funded by Princeton alumni and cryptocurrency giants. Princeton alumni crypto personalities include Joseph Lubin, Michael Novogratz, Peter Briger Jr. and Daniel Morehead. Prior to the FTX bankruptcy, Sam Bankman-Fried was the scheduled keynote speaker. Instead, a panel titled “The End of FTX and Other Crypto Assets: Lessons Learned” came to the fore. Behnam cited limited resources. He urged lawmakers and policymakers to act as quickly as possible. Thus, he defended the actions of his commission. “We don’t have the luxury of waiting,” he added.
Benham: CFTC has limited capacity
Founded in 1922, the CFTC has recently emerged as one of the main regulators of the US crypto markets. Since 2014, its new approach to regulating decentralized organizations (DAOs) has attracted attention. That’s why Ooki has filed more than 60 enforcement actions, including the most recent lawsuit against the DAO. Behnam noted that his commission has limited capacity for enforcement action. Because of the unique nature of the crypto market, he said, it lacks direct oversight, which is one of the goals of possible legislation.
Behnam cited the reasoning that crypto behaves like a speculative market. “This is unlike any commodity we deal with,” he said. In the vacuum created by the lack of regulation, one of the central debates has been whether they should be classified as commodities or securities. Behnam said that the only cryptocurrency that should be seen as a commodity is Bitcoin. Thus, he suggested that Ethereum could also be a commodity. But he backed out from previous statements he made in October.
Benham: CFTC won’t sit back and wait for technology to evolve
Behnam described the matrix of regulators as a “flawed system.” But he praised the cooperation between the institutions. Despite the Ooki DAO lawsuit, the crypto industry largely views the CFTC as a friendlier regulator than the SEC. The commission’s ties to FTX have bolstered that reputation. In his speech at Princeton, Behnam did not touch upon the CFTC’s relationship with FTX. Instead, he referred to the need for regulation in different areas of the crypto industry to prevent similar crises.
He questioned the usefulness of lending institutions like BlockFi, which filed for bankruptcy earlier this week. He emphasized that individual investors are involved and that there are no use cases in crypto beyond speculation. As FTX and Bankman-Fried grapple with bankruptcy and investigations, DCCPA’s fortunes change.
At an event earlier this month, SEC Chairman Gary Gensler spoke about the bill’s ties to FTX. A piece of legislation needs to balance innovation and regulation, Behnam said. Thus, he exhibited a softer stance. Still, Behnam said, as a market regulator, the CFTC cannot sit back and wait for the technology to evolve.
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