Crypto cash markets are “beyond our expertise”, says CFTC Commissioner Stump

Rick Steves

The CFTC Commissioner suspects the root of some of the confusion as to the CFTC’s role in the digital asset space is the regulator’s role in the cash markets. 

CFTC Commissioner Dawn Stump has addressed the confusion regarding the role of regulators in the digital asset space again.

Ms. Stump has been making efforts to explain the regulators’ scope as something that must be dealt with before government agencies engage in a jurisdictional power-grab.

“Until we remedy that confusion, we cannot have an honest conversation about whether any agency needs new authorities. And only then can informed stakeholders contribute to designing a workable regulatory structure”.

The Commissioner pointed to “the persistent tendency to draw a distinction between commodities and securities” as an example of the confusion of how it all works, often stemming from “well-intentioned product developers seeking to determine if they need to face the CFTC or the Securities and Exchange Commission (SEC) in achieving proper U.S. regulatory compliance”.

“Is my product a security or is it a commodity?” is the wrong question, she stated. “As most everyone here knows, the CFTC does not regulate commodities. So, any pronouncement that an asset is a commodity should not be interpreted as a roadmap to the CFTC for regulatory oversight”, Ms. Stump continued.

“I want to be very clear that the CFTC regulates derivatives – we are specifically charged by Congress to regulate futures and swaps – many of which have commodities as their underlying assets, but we do not regulate the underlying commodities themselves”.

The SEC regulates securities and the CFTC regulates derivatives – not commodities – including some derivatives on securities.

“Complicated? Unfortunately, yes. But it is how our system is designed today, with multiple regulators involved in the oversight of assets depending on the nature and function of the specific product”.

The CFTC Commissioner suspects the root of some of the confusion as to the CFTC’s role in the digital asset space is the regulator’s role in the cash markets.

Congress provided the CFTC with this expanded enforcement authority because such fraudulent or manipulative activity in the cash markets may have an impact on the derivatives markets, she explained.

“Given the confusion that exists, I believe we must consistently clarify that this broader enforcement authority does not suggest that we are conducting day-to-day regulatory oversight in these cash or spot crypto markets. Failing to be clear on this point gives the public a false sense of security and leaves those seeking a regulatory home perplexed”.

Besides the need to stop the confusion and “silly distinctions between commodities and securities”, the CFTC should focus on what it does best, regulating the infrastructure that supports futures and swaps markets.

“Meanwhile, a regime already exists for regulating futures and swaps on digital assets, and we at the CFTC have for some time been applying our regime in this space”.

Before expanding the CFTC’s authority into the cash markets, Commissioner Stump called for careful consideration “to whether the market infrastructure we oversee today can logically benefit the cash markets, which have historically been beyond our expertise”.

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