While Congress has taken several steps to shine a light on the workings of the digital assets market, Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), says lawmakers still need to address the CFTC’s lack of enforcement authority in the digital asset space.
At a Feb. 9 hearing, Behnam told members of the Senate Committee on Agriculture, Nutrition, and Forestry that although the CFTC’s core responsibility is regulating the commodity derivatives market, there are several technical complexities in the digital asset market that would benefit greatly from CFTC oversight.
“The technical complexities around securing and transacting in digital assets, particularly issues around custody, have resulted in numerous platforms losing funds to hacks, exploits, and poor cybersecurity,” Behnam said. But without a clear regulatory framework, CFTC has limited authority in addressing fraud and manipulation of digital assets, he added.
Currently, there is no one regulator – either state or Federal – with dominant visibility into digital asset commodity trading activity. The CFTC, other Federal agencies, and state regulators have all been responsible for collectively establishing the existing regulatory environment. In the last several years, the CFTC’s has largely relied on tips and whistleblowers who brought scams and other illicit activities involving digital assets to the agency’s attention.
“And this is not working,” Behnam explained. “We have a number of exchange-traded derivatives on crypto assets on several registered CFTC exchanges, but the visibility to the underlying market is limited at most. In essence, this is an unregulated market… [and] there is so much that we are not able to see because of this limited authority.”
Behnam said it’s “important that we find ways to sensibly bring this emerging market within the regulatory fold” to reach technology-related strategic goals that many digital asset advocates have proposed.
CFTC, Behnam told lawmakers, is well situated to play an increasingly central role in overseeing the digital asset market.
“We are past the stage where digital assets and decentralized financial technologies are a research project, sandboxing what may come in the future. The issues are at the front and center of our thinking at the commission in addition to our traditional regulatory, oversight, and enforcement responsibilities,” he said.