- The Biden administration has openly declared its intent to be front and center of cryptocurrency regulation and that was echoed by Biden’s four nominees to join the CFTC.
- So far, Wall Street’s foray into cryptocurrencies have tended to nibble on the fringe, because of the lack of clear regulation or a comprehensive framework governing the nascent digital asset industry.
From asset non grata just several years ago to top of the agenda for U.S. President Joe Biden’s nominees to the U.S. Commodity Futures Trading Commission (CFTC), cryptocurrencies have come a long way.
The Biden administration has openly declared its intent to be front and center of cryptocurrency regulation and that was echoed by Biden’s four nominees to join the CFTC.
At a confirmation hearing before the Senate Agriculture Committee, Biden’s CFTC nominees said the agency’s history of overseeing cryptocurrency derivatives put it in an ideal position to do more to regulate the cryptocurrency industry as a whole.
To be sure, the CFTC allowed for the creation of CME and Cboe’s first forays into cryptocurrencies through their Bitcoin and then Ether, cash-settled futures and paved the way for the first Bitcoin ETF in the U.S., albeit one underpinned by those very futures.
Last month, CFTC Chairman Rostin Behnam told lawmakers that they should consider giving the regulator more authority to oversee cryptocurrencies and expand the budget for the agency by at least US$100 million.
Because cryptocurrencies straddle various specific types of securities, a turf war for jurisdiction has been waged between agencies over the past several years over which one should have the right to regulate cryptocurrencies.
For now, the CFTC’s role has been limited to oversight of derivatives based on Bitcoin and Ether, as well as investigating allegations of fraud or manipulation in underlying markets, but is chomping at the bit to do more.
Meanwhile, the U.S. Securities and Exchange Commission, helmed by the crypto-savvy Gary Gensler, has been making waves for suggesting that most cryptocurrencies fall under his agency’s tough investor protection rules, akin to securities, which most industry stakeholders have rejected.
Making matters more complex for regulators, Biden CFTC nominee Christy Romero said the agency still lacked visibility of the underlying cryptocurrency markets, but expanding the role of the CFTC to cryptocurrency derivatives could be the first step in greater institutional adoption.
So far, Wall Street’s foray into cryptocurrencies have tended to nibble on the fringe, because of the lack of clear regulation or a comprehensive framework governing the nascent digital asset industry.
Certainty provided by the CFTC could rapidly change that situation as financial institutions would enjoy the regulatory certainty that could provide and potentially provide greater access to more clients and investors.
That move towards regulation and standardization may be closer than anticipated, with the International Swaps and Derivatives Association already putting out whitepapers on suggested formats and terms for digital asset contracts.
All of which have the potential to supercharge cryptocurrency derivative products and push them into the more mainstream world of finance.