United States: Agriculture Committees Seek CFTC Regulatory Guidance on Digital Assets
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In a joint letter, leaders of the House Agriculture Committee and the Senate Agriculture, Nutrition and Forestry Committee request CFTC Chairman Rostin Behnam to issue regulatory guidance on digital asset markets.
The letter outlined the CFTC’s existing authority over certain digital assets (e.g., Bitcoin and Ether) under the Commodities Exchange Act, including (i) the CFTC’s regulatory authority over all derivatives on raw materials and (ii) the anti-fraud authority for physical transactions. The letter noted the very substantial benefits that can result from digital assets and decentralized finance (such as reduced transaction costs and settlement times), but also highlighted the potential for fraud and manipulation without the presence of regulatory oversight. responsible.
The executives asked the CFTC to provide comparisons between digital asset markets and other financial markets with respect to: (i) size; (ii) attendance; (iii) scope of retail investor involvement; and (iv) financial intermediaries. Leaders also demanded responses detailing:
- the proportion of the digital asset market traded by U.S. persons;
- the types of misconduct seen in the digital asset market and whether such misconduct presents unique risks compared to misconduct seen in traditional financial markets;
- how the CFTC has worked with stakeholders to support market growth, while ensuring consumer protection and market integrity;
- the CFTC’s collaborative work with other federal regulators in this area; and
- any shortcomings by CFTC regulators to adequately regulate the digital asset space as the market continues to grow.
Comment Steven Lofchie
The questions posed are perfectly reasonable, but they are not the most important questions and they are not directed to the most important regulator. The letter begins with assumptions that digital asset markets are growing and that there is some level of fraud in these markets (both assumptions are certainly true) and essentially asks what the CFTC is going to do about it. While many digital assets may be “commodities” and therefore the CFTC has jurisdiction over fraud enforcement, the CFTC is not particularly well placed or staffed to chase down every fraud incident on the goods in the United States – at least if the CFTC wants to continue its day. work too.
The most important step is for the SEC (or Congress to push the SEC) to review the treatment of utility tokens by securities law. Until the SEC changes the securities law’s treatment of utility tokens in light of the particular characteristics of the product, the digital asset industry is largely forced to go underground. There is no benefit to market participants attempting to comply with a regulatory regime that prevents them from doing business. As a result, digital asset companies are either moving outside the United States or trying their luck with regulators. A modified regulatory system, such as that proposed by SEC Commissioner Hester M. Peirce, could allow well-meaning creators of digital assets to come forward, which in turn would help federal regulators focus their efforts on real villains.
(Note: The Agriculture Committee has authority over the CFTC, but not the SEC, and is therefore not itself the committee that can push the SEC.)
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