CFTC Chairman Behnam Urges Congress For Increased Crypto Regulation: We Are 'On The Front Lines'

2 months ago

Earlier this month, Sen. Kirsten Gillibrand (D-NY) questioned the CFTC Chairman Rostin Behnam on crypto and digital currencies oversight during a Senate Agriculture Committee hearing.

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Transcript

00:00Thank you for all of your wonderful work in a broader sense. We know that our

00:04jurisdiction is commodities and the CFTC, but very much appreciate your efforts in

00:09this area. Well, thank you Madam Chairwoman. Chairman Benham, thank you for

00:13being here. I really appreciate your agency's leadership in the digital

00:16commodity space. As a member of this committee, I encourage congressional

00:20progress on digital commodities. The CFTC's continued partnership is essential

00:25to developing robust legislation. The decision of regulation between the SEC

00:31and the CFTC is an ongoing discussion in the digital asset space. In your

00:35testimony before this committee in September of 2022, you stated that the

00:39CFTC is the right regulator for the digital asset commodities market.

00:43Legislative efforts in the Senate and the House seek to determine pathways to

00:47bring crypto into the regulatory perimeter. Many of these efforts empower

00:52the CFTC to lead regulation of digital commodities. When Congress acts, is the

00:57CFTC prepared to take this regulatory role? Thanks, Senator, for the question and

01:02your support. I'll answer that in two ways. First, in terms of experience and

01:08expertise, I can't think of another regulator, and you suggested this, that

01:12has been on the front line of crypto for the better part of ten years, both from

01:15an enforcement side and then we do have regulated futures contracts on Bitcoin

01:19and ETH, so we are familiar with the constituency, we're familiar with the

01:23market, and it sort of ebbs and flows over the period of time, and then

01:27obviously from an enforcement standpoint, we've been a front-line regulator across

01:30the country and globally as well. Second part is, can we handle this? I often point

01:36to what the agency was able to accomplish after the financial crisis,

01:39and previously before the financial crisis, you had the

01:43counter-derivatives markets, more known, more commonly known as the swaps market,

01:47moving into the jurisdiction of the CFTC. This is a multi-trillion dollar

01:51global market that the CFTC, from 2010 when President Obama signed Dodd-Frank,

01:57through the course of a few years, was able to implement a global regulatory

02:02regime over the swaps market. So we've done it before, I think we can do it

02:06again, many similarities between the two, and I think the agency's proven itself

02:10very capable in bringing in markets within the fold. Can you tell us some of

02:15the risks of inaction in this space, and how could legislation be helpful to

02:19provide additional regulatory and jurisdictional clarity? And second, how

02:24does the CFTC coordinate with the SEC in regulation, registration,

02:29rulemaking, and enforcement in the current regulatory vacuum? Thanks, Senator.

02:34On the inaction question, taking that first, the number one priority for me is

02:39customer protections, and I know that it is for you as well, but ultimately if we

02:44don't take action, if Congress is not able to fill this gap, we're going to

02:47continue to see enforcement cases build, and ultimately, as I've said to some of

02:52your colleagues, we're always being reactive in our current posture. We're

02:56never able to regulate, register, and surveil markets like we traditionally do.

02:59We always have to react to customer complaints and tips, and the problem with

03:03that is the money is often gone and the frauds already occurred. The other

03:07inaction, I think this is more for you, for me as a regulator, you've

03:12pointed this out on numerous occasions, there is a level of concern around

03:16regulatory certainty. There's a lot of entrepreneurs and innovators that are

03:21uncertain what the posture is going to be in the U.S. I serve as the Vice

03:27Chair of IOSCO, which is an international organization of securities

03:30commissions. We are behind at this point. We've been behind for a number of years

03:34from a U.S. perspective, and I've seen that happen over the course of two or

03:38three years as Vice Chair of the organization, and I think it's important

03:41that we fill this gap by moving ahead with our allies across the globe. In

03:45terms of coordination with the SEC, I would focus primarily on the

03:50coordination we have with the SEC from an enforcement perspective over the

03:55course of many years, including with the SEC but also the Justice Department. We

04:00have brought cases together with them, both civil and criminal, and our

04:04enforcement teams work very closely because we do have a fair amount of

04:08overlap on the enforcement side. On the regulatory side, it's much more limited

04:13because, again, for the reason we're here today, we don't really have regulatory

04:17authority over the spot market, so there's no registration or, you know,

04:20these typical things that we would typically do with a financial market

04:24participant that I'm hoping that this Congress and this committee

04:28will work on. Many of my colleagues are concerned with safety and stability of

04:35digital commodities and digital assets. How does the CFTC balance consumer

04:40safety when it comes to digital commodities while allowing innovation,

04:43and how could the core principles found in the Commodities Exchange Act be

04:47applied to crypto markets and potential legislation to encourage consumer

04:51protection and market integrity moving forward? Thanks, Senator. Taking the

04:55second question first, the core principles, and I've said this a few

04:58times, are really a very efficient and robust and well-worn system. It's

05:06orderly and fair trading, it's making sure products are not readily susceptible

05:10to fraud and manipulation, system safeguards, which is cybersecurity and

05:13operational risk, making sure entities have appropriate financial resources. So

05:18off of these core principles, the agency then builds more prescriptive rules. So

05:22it's a good foundational system that's worked in all financial markets and one

05:26that I think would work in the crypto market as well. In terms of what the

05:31agency is doing to foster innovation, we have the Office of Technology Innovation,

05:36which I lead and the director reports to me. We also have a number of advisory

05:41committees that have been very engaged with the industry, learning what they're

05:45doing, seeing and hearing what their challenges are, and to the extent

05:48possible, working with them to ensure that they have a sense of what our

05:52authority is, what we can and cannot do. But ultimately, again, as I said earlier,

05:56very limited in scope to just futures authority, which at this point is

06:01relatively small market to other derivatives. But this is why we're

06:05here, and I think if we can provide this authority, then we would certainly, to

06:09your point, do our best to engage with the industry and support innovation.

06:12Thank you, Chairman Benham.

CFTC Chairman Behnam Urges Congress For Increased Crypto Regulation: We Are 'On The Front Lines'

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