Former CFTC Chairman Chris Giancarlo analyzes the impact of cryptocurrency policy on “The Claman Countdown.”
The new Trump administration wants to expand the power of the Commodity Futures Trading Commission by granting it oversight of a significant portion of the $3 trillion digital assets market, FOX Business has learned.
The move is part of a broader effort by President-elect Donald Trump and Republican majorities in Congress to roll back some of the regulatory power that the Securities and Exchange Commission has exercised over the digital assets industry under the presidency of Biden and his outgoing SEC chairman. , Gary Gensler.
The CFTC, often referred to as the SEC’s “little sister,” is mandated by Congress to oversee the estimated $20 trillion U.S. derivatives market, which includes trading in futures, options and securities. physical commodities like gold, oil and wheat. Like the SEC, the CFTC has the authority to establish market rules and initiate enforcement proceedings, but it is often perceived to have a lighter regulatory character than the SEC because derivatives markets are dominated by sophisticated institutional actors as opposed to small investors and are therefore considered sophisticated institutional actors. be better equipped to manage risks.
The Commodity Futures Trading Commission headquarters in Washington, DC on December 23, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images)
With Trump coming to power and the crypto industry’s growing influence in Republican politics, the CFTC’s role may soon expand to include regulating spot markets for digital assets considered to be commodities – such as Bitcoin and Ethereum – as well as the exchanges that facilitate their trading. according to sources with direct knowledge of the Trump team’s thinking. More than 50 million people hold digital assets, but key players in the new Trump administration say less stringent regulation is needed to spur innovation in the crypto sector, including potentially transformative blockchain technology that eliminates costly intermediaries in commercial transactions.
“With adequate funding and under proper leadership, I believe the CFTC could begin regulating digital products on day one of Donald Trump’s presidency,” former CFTC Chairman Chris Giancarlo told FOX Business.
Giving the CFTC regulatory authority over the bitcoin and ethereum spot market (which make up up to 70% of the global crypto market) and potentially other tokens considered digital products, would give it also the power to regulate the exchanges on which these assets are traded. on. This move, if implemented, would mark an important step towards regulatory clarity for businesses and individuals involved in trading the two largest cryptocurrencies by market capitalization, as no regulatory body currently has jurisdiction clarity on these spot market transactions.
Republican presidential candidate and former President Donald Trump gestures during the Bitcoin 2024 event in Nashville, Tennessee, July 27, 2024. (Kevin Wurm/Reuters/Reuters Photos)
Uncertainty surrounding the classification of digital assets and the reluctance of the SEC or CFTC to write specific rules has led both agencies to regulate the space through enforcement measures. The SEC, under Gensler’s leadership, conducted a three-year industry-wide crackdown to reinforce its view that most cryptocurrencies, except Bitcoin, are securities, making him and the SEC widely unpopular in the US crypto industry and leading it to favor the CFTC as its primary regulator.
The SEC had no immediate comment.
Giancarlo, also known as “Crypto Dad,” served as chairman of the CFTC during Trump’s first term and is currently being considered for the role of “crypto czar” in the new administration – a new position so far nebulous that would help execute crypto policy and potentially oversee an industry-led advisory board.
Chris Giancarlo, former Chairman of the Commodity Futures Trading Commission (CFTC), speaks at the DC FinTech Week event in Washington, DC on November 8, 2023. (Ting Shen/Bloomberg via Getty Images / Getty Images)
He has long called for his former agency to play a greater role in regulating digital coins. In 2022, Giancarlo wrote a letter to the Senate Agriculture Committee, which oversees the CFTC, in support of the agency’s spot crypto authority, highlighting his early involvement in digital assets dating back to 2015, when she viewed bitcoin as a commodity. Under Giancarlo, the CFTC approved futures trading in the price of bitcoin.
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Biden’s outgoing CFTC Chairman Rostin Behnam asked the Agriculture Committee during an oversight hearing in July for additional funding to begin regulating crypto markets more effectively than through enforcement . Behnam said about 50% of the agency’s enforcement actions this year have been taken against crypto companies, a “staggering statistic” for an agency that does not have a mandate to regulate the sector, he said. he declared.
The additional funding, which Congress would ultimately have to authorize, would be crucial for the CFTC to begin policing fraud and manipulation in crypto spot markets. The agency’s 2024 operating budget was more than five times smaller than the SEC’s — $400 million compared to $2.4 billion — and it employs about 700 people compared to the SEC’s 5,300.
In terms of leadership under the new administration, it’s unclear who Trump plans to replace Behnam, but a handful of names have been bandied about, including current GOP commissioners Caroline Pham and Summer Mersinger, both pro-crypto candidates who often speak at industry events.
While the idea of a larger role for the CFTC in regulating digital products would be welcome for the crypto industry, many traditional CFTC groups fear that giving the agency authority unprecedented in certain spot markets is reflected in the regulation of physical and financial goods. agricultural products, which fall under the jurisdiction of other agencies such as the Ministry of Agriculture. Giancarlo says these concerns should be addressed using specific language in any new legislation giving the CFTC one-time authority over digital products.
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The Commodity Futures Trading Commission (CFTC) in Washington, DC, August 30, 2020. (Andrew Kelly/Reuters/Reuters Photos)
Trump’s plan to allow the CFTC greater crypto oversight is part of a broader mission to restructure the relationship between the two top financial regulators, encouraging them to work together on certain crypto policies such as application of stablecoin regulations. Trump also wants to overhaul the SEC’s culture after three years under Gensler, whose sweeping rulemaking agenda and progressive leanings led to the departure of many top officials and a disgruntled employee union constantly at odds with him.
“There is a lot of work to do at the SEC – a lot of its top talent has left the building, so we need to make it work again and refocus its mission on a pro-innovation agenda,” said Giancarlo, who took over to Gensler as head of the SEC. Chairman of the CFTC in 2017. Giancarlo was previously a favorite to replace Gensler as SEC chairman under the new administration, but he explicitly told the Trump transition team that he did not want to “clean up the mess left by Gary.” Gensler for the second time.”
SEC Chairman Gary Gensler participates in a Financial Stability Oversight Board meeting at the U.S. Treasury July 28, 2023 in Washington, DC. (Kevin Dietsch/Getty Images/Getty Images)
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It’s unclear who Trump will tap to lead the SEC, but sources close to the transition team say being pro-crypto is not the only quality of the candidates being considered. Outside of crypto, the SEC is also responsible for overseeing $100 trillion worth of securities markets, including stocks, bonds, mutual funds, treasuries, and more .
“The SEC has a solid structure, but whoever leads it next will need great political skills as well as great administrative skills to return it to an important role in the administrative agenda,” Giancarlo said.
