The Commodity Futures Trading Commission (CFTC) plans to start developing regulatory rules for the cryptocurrency market as the Securities and Exchange Commission (SEC) has been inactive in this regard and is increasingly criticized by the community for doing so.
As part of a conference organized by the Cato Institute’s Center for Monetary and Financial Alternatives (CMFA), Caroline Pham, Commissioner of the CFTC, issued a statement outlining the regulator’s intentions to begin developing a regulatory framework for the local cryptocurrency market.
According to Pham, the CFTC is ready to release a pilot program to regulate the digital asset market, which will create a legal framework for new technologies and market structures in accordance with existing U.S. laws. The official urged all interested parties to participate in the discussion of the project to decide whether it’s necessary to introduce a regulatory framework for the crypto market on a permanent basis.
Notably, Pham’s statement came shortly after Chris Larsen, Co-Founder of Ripple Labs, publicly criticized the actions of the Securities and Exchange Commission (SEC) for the country’s failed crypto policy. He said the regulator’s recent actions on crypto projects only underscore the unwillingness of Gary Gensler and President Biden’s administration to bring regulatory clarity. In Larsen’s view, the SEC is comfortable with the lack of clear regulatory standards, because in such a situation, the agency can go after anyone and set bullying rules. To prove his point, Larsen cited the court’s decision in the Grayscale case, pointing out that even the court system denies the validity of the SEC’s action.
It’s worth noting that the SEC is apparently no longer seen by cryptocurrency companies as a serious adversary in litigation. Thus, some companies that had previously decided not to enter into a battle with the regulator have become active. For instance, it became known that the lawyers of the blockchain platform LBRY are trying to appeal the July 11 ruling in favor of the SEC in the U.S. Court of Appeals for the First Circuit.
On the other hand, the CFTC is becoming increasingly active in taking regulatory action against decentralized finance protocols (DeFi). For example, the regulator recently accused the Opyn, ZeroEx, and Deridex protocols of violating U.S. laws, specifically:
- in unregistered activity as derivatives trading platforms;
- in failing to register as a futures broker;
- in failing to comply with custody requirements for customer funds;
- in unlawfully providing retail commodity trades using credit and margin in digital assets.
The companies have agreed to settle the charges and pay fines of $250,000, $200,000 and $100,000, respectively. The companies are not the first on the CFTC’s long list of defendants. The regulator has previously sued FTX and Sam Bankman-Fried, Binance and Changpeng Zhao, and also Ooki DAO.
The U.S. officials previously developed a bill that clearly distinguishes the CFTC and SEC responsibilities within the framework of crypto market regulation, but the document is still under consideration.
