Senate Committee Calls for CFTC Crypto Oversight

The FTX collapse has prompted calls for regulation around the world, after the incident highlighted the need for clear and sensible guidelines. In the US, politicians are now demanding oversight by both the Securities and Exchange Commission (SEC) and the Commodities and Futures Trading Commission (CFTC).

A Senate Agriculture Committee hearing urged the US Congress to act quickly and legislate for the CFTC. This is to prevent further funds from being lost after FTX collapses. The committee asked Commodities and Futures Trading Commission (CFTC) Chairman Rostin Behnam to clarify what led to FTX’s rapid collapse. It also discussed how US customers’ funds can be protected in the future.

The CFTC bill provides for the sharing of regulatory responsibilities

The committee was quick to condemn FTX’s lack of risk management and the need for swift regulation to ensure such a meltdown does not happen again. The Committee Chair – Senator Debbie Stabenow – expressed hope that the Digital Commodities Consumer Protection Act of 2022 will serve the purpose of greater regulation of the crypto industry under the authority of the CFTC. Stabenow drafted the bill with Senator John Boozman in August 2022. Critically, she added that the CFTC would not be the only agency to regulate cryptocurrencies.

“I’ve said it before and I’ll say it again: The Digital Commodities Consumer Protection Act does not take away power from other financial regulators, nor does it make the CFTC the primary crypto regulator because crypto assets can be used in many different ways” – Debbie Stabenow, US Senator

This clarification comes after Securities and Exchange Commission (SEC) Chairman Gary Gensler opposed the bill. He argued that the CFTC-centric bill would not be enough to protect investors. The Senate Agriculture Committee also oversees the CFTC, which regulates the US derivatives and commodities markets.

The responsibility lies primarily with the SEC

According to Benham, FTX had previously worked with the CFTC to register a US-based derivatives exchange and clearinghouse (LedgerX). He said the company’s businesses will remain solvent for the foreseeable future. In addition, the CFTC was instrumental in LedgerX avoiding bankruptcy for the 130 companies linked to FTX. President Joe Biden inaugurated Behnam as the fifteenth CFTC Commissioner on January 4, 2022. The commissioner urged Congress to give the Commodities and Futures Trading Commission the power to regulate the cryptocurrency industry.

“The CFTC lacks the power to fully regulate the digital asset market and to prevent something like this from happening again, we need to be empowered by Congress.” – Rostin Behnam, Chairman of the CFTC

Behnam dismissed claims that the CFTC was a soft-spoken regulator compared to other federal agencies. He pointed out that the agency imposed $2.5 billion in fines by 2022. Although several industry players have pointed to the lack of regulatory clarity as a reason for FTX’s collapse, crypto-skeptic and former SEC official John Reed Stark says the crypto industry’s calls for regulatory clarity is no more than a thinly veiled one that is gambit. This to get permission for risky speculation.

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