If one of the chief US financial watchdogs has his way, the collapse of Sam Bankman-Fried’s FTX will shift into high gear a push to make his agency the main Bitcoin regulator and give it oversight of crypto exchanges.
On Thursday, Rostin Behnam, chairman of the Commodity Futures Trading Commission, will testify at the first congressional oversight hearing on the spectacular implosion of crypto platform FTX. He’s expected to tell members of the Senate Agriculture committee about the need to move forward with legislation to bring more of the industry onto his agency’s turf.
“Failure to act will leave consumers who have made investments in digital commodities largely unprotected,” Behnam said in remarks prepared for Thursday’s hearing.
Though he says there’s a critical need for a comprehensive framework for digital assets due to gaps in regulation and the appetite for crypto, his call for fast action will likely run into resistance.
Bankman-Fried’s vocal support of the bipartisan Senate bill has cast a shadow over the legislation. Critics are wary of new powers going to an agency seen as the industry’s preferred regulator and one that has far fewer resources than the Securities and Exchange Commission.
Voting on legislation during the backlash against FTX also could put lawmakers in a tough spot, particularly if they can’t get the SEC’s Gary Gensler and a host of critics on board. Gensler has said that most crypto tokens are securities that fall under his agency’s jurisdiction. He has also urged crypto exchanges offering them to register with the SEC.
More weigh-in from the Biden administration is almost certain. Earlier this week, Sherrod Brown, head of the Senate Banking Committee, urged Treasury Secretary Janet Yellen to work with lawmakers to craft crypto legislation.
Behnam has backed the Senate legislative effort led by Democrat Debbie Stabenow, the chair of the Agriculture committee who he had served as senior counsel, and Republican John Boozman. The bill would give the CFTC more power to directly oversee cryptocurrencies that are commodities, such as Bitcoin, as well as digital-asset exchanges.
Currently, the agency’s oversight abilities are primarily limited to crypto derivatives. The FTX-owned derivatives exchange that the agency oversees, LedgerX, has remained solvent and operational despite the troubles roiling the rest of Bankman-Fried’s crypto empire.
Though not the only crypto legislation with industry champions, the Digital Commodities Consumer Protection Act was among the most significant for the CFTC. The bill would beef up resources and staffing for a markets regulator that has been chronically underfunded.