Crypto’s Favorite Regulator Doesn’t Have Enough Teeth, Says US Senator – DL News

A Senate Appropriations Committee hearing on Thursday highlighted the question at the heart of U.S. cryptocurrency regulation: Does the U.S. derivatives regulator have sufficient resources to police cryptocurrencies?

Lawmakers fear the Commodity Futures Trading Commission is “biting off way more than it can chew” in its bid to regulate cryptocurrency markets, said Democratic Sen. Dick Durbin of Illinois.

Durbin spoke during a hearing to consider funding for the CFTC and its sister agency, the Securities and Exchange Commission.

The SEC has significantly more resources than the CFTC. It’s a discrepancy that has concerned previous CFTC chairs and which has become more urgent now that Congress is seriously considering tailored regulation of cryptocurrencies.

CFTC Chairman Rostin Behnam responded to Durbin, saying his agency is “adequately equipped” to oversee the markets it is tasked with overseeing.

“But if we were given power over the cryptocurrency markets, I would certainly expect the budget to increase,” he added.

FIT21 Act

The bill, which passed the House of Representatives in May, would give the CFTC exactly that amount of power – though not a larger budget – if it were to become law.

The cryptocurrency industry has hailed the FIT21 Act as the path to a market structure tailored to cryptocurrency trading.

In line with the wishes of many cryptocurrency industry players, the bill considers anointing the CFTC, rather than the SEC, as the industry’s primary regulator.

This has raised concerns that the CFTC is underfunded.

Various financing models

On Thursday, SEC Chairman Gary Gensler asked the Appropriations Committee for $2.6 billion to fund the SEC for fiscal year 2025, which begins Oct. 1.

Behnam asked the commission for $399 million for fiscal year 2025.

The difference in their budgets is due in part to the fact that the SEC is the larger agency that oversees public securities markets, which has historically dwarfed the futures markets regulated by the CFTC.

However, when Congress passed regulations in the wake of the Obama-era financial crisis, the CFTC was given a large portion of the swaps markets to oversee without a corresponding increase in its budget.

Additionally, the SEC is partially self-financing because it collects fees from market participants that offset its costs to taxpayers.

The preferred regulator is the CFTC

However, the crypto industry has lobbied for the CFTC to be its primary regulator, believing it to be more lenient.

But Behnam rejects characterizing his agency as relatively toothless.

He told the committee on Thursday that his agency’s enforcement history shows it can handle the cryptocurrency industry.

“Over the last 10 years, we have brought 135 cryptocurrency cases, settled billions of dollars (in penalties), and effectively policed ​​a market in which we have no direct authority and jurisdiction,” Behnam said.

He added that the CFTC’s failure to provide this resulted in “fraud and rampant market abuse and ultimately public distrust, distrust and loss of funds.”

Joanna Wright writes about cryptocurrency regulation for DL News. Contact her at [email protected].