Ex-CFTC Chair: Crypto Regulation Could Be Joint SEC, CFTC Effort

Neither the SEC nor the CFTC has the power to solely take on crypto regulation, and the industry needs a stake in the game

article-image

Former CFTC Chair Tim Massad | Brookings Institution/“Timothy Massad” (CC license)

share

When it comes to US crypto regulation, the two federal agencies at the forefront may need to collaborate to clear up a number of uncertainties, according to a former CFTC chair.

“The SEC and the CFTC could jointly create a self-regulatory organization,” former CFTC head Tim Massad said during a virtual appearance hosted by the Global DCA Wednesday. 

Self-regulatory organizations set industry standards and regulations, most notably in the financial sector. While they still are subject to government oversight, they allow industry participants to keep an eye on each other and ensure best practices are followed. 

Neither the SEC nor the CFTC has the power to solely tackle the regulation of digital assets, according Massad, now a research fellow at Harvard University’s School of Government.  

The lines are currently blurred, Massad said — with the CFTC taking control over exchange-traded bitcoin and ether futures markets and the SEC stepping in when it deems a crypto token a security. Though the exact classification of tokens is a separate issue, Massad said the two agencies need to come together to oversee crypto’s cash market, predominantly housed by exchanges. 

A new organization could “develop common standards that would apply to trading venues and other intermediaries, regardless of whether a particular token is a security, a commodity or something else,” he added. 

If the SEC and CFTC moved to create a self-regulatory organization, it would not be the first of its kind. The New York Stock Exchange and Fixed Income Clearing Corporation are two examples. 

The crypto industry would be responsible for paying for any new collective, which would be responsible for enforcing the rules the SEC and CFTC create. 

“It’s ironic, of course, that we’re also at this point where we have these large intermediaries, large trading venues that are essentially unregulated, or only very lightly regulated,” Massad said. “And I say it’s ironic because when you read the original bitcoin white paper and think about the purpose of bitcoin, it was to eliminate large trusted intermediaries, or at least eliminate the need to rely on large trusted intermediaries and create peer-to-peer systems for transferring value.”

Congress, meanwhile, continues to mull over the Digital Commodity Consumer Protection Act (DCCPA), which received vocal support from now-disgraced FTX founder Sam Bankman-Fried. The legislation would grant the CFTC more power in overseeing cryptocurrency markets. 

Current CFTC Chair Rostin Behnam appeared before Congress earlier this month, where he highlighted the importance of the bill — and suggested it could have softened the blow of the recent FTX collapse.

“Based on what we know thus far, a lot of the issues that have arisen and sort of come to light are significant conflicts of interest, significant allegations of commingling customer money and house money, lack of books and records, lack of corporate governance and risk controls, just to name a few,” Behnam said. “And these are, from our understanding in working with [bill sponsors] on the DCCPA, core elements of the DCCPA.”


Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.


Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.


Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


Tags

upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Solana Q2 Update

Research

While most alternative Layer 1 networks, have seen lackluster usage since the market downturn, Solana has continued to show significant potential throughout 2023.

/

article-image

Scattershot securities labels aimed at major cryptocurrencies sent prices lower. Bitcoin, however, remains unfazed.

article-image

The crypto industry must be brought to heel to protect our markets

article-image

Curve founder Michael Egorov misappropriated trade secrets by falsely promising the plaintiffs a stake in Curve, three venture capital firms claim

article-image

Moody’s changed Coinbase’s outlook because of uncertainty about how the SEC charges will affect the business and money flow

article-image

The exchange warned customers to withdraw USD funds by June 13

article-image

The launch of ‘The Amory’ will provide gamers the chance to earn rewards through borrowed assets