CFTC chair Rostin Behnam recently spoke before the Senate Committee on Appropriations, asserting that the agency is fully capable of taking on additional crypto responsibilities. He dismissed concerns that the CFTC would be overwhelmed, stating that regulating crypto commodities falls within the agency’s purview. Behnam acknowledged a regulatory gap that needs to be filled and emphasized that the CFTC is well-equipped to oversee traditional markets, although additional funding would be necessary for supervising crypto markets. He also expressed confidence in the application of existing KYC/AML laws to the crypto space, stating that there is no need to deviate significantly from current regulations.
The CFTC’s authority over crypto and non-traditional assets is presently limited to fraud and manipulation. Behnam highlighted that the agency relies on surveillance, oversight, and tips/complaints to address issues in these markets. He revealed that the CFTC handled 47 crypto cases in the previous fiscal year, a substantial portion of its workload. However, Behnam expressed apprehension about the sustainability of the agency’s current trajectory, warning of potential fraud and manipulation if unchecked growth in the crypto market persists. Despite limited direct authority, the CFTC has managed to secure significant financial penalties in various crypto cases over the years.
SEC chair Gary Gensler, who also testified at the hearing, offered a more cautious perspective on the CFTC’s expansion into the crypto space. Gensler noted that the CFTC’s ability to take on additional responsibilities hinges on the specific duties assigned to the agency. He highlighted the vast number of crypto tokens in existence and pointed out the SEC’s comprehensive disclosure framework for securities, which is lacking in the crypto sector. Gensler criticized the crypto industry for non-compliance with existing disclosure regulations, implying a need for stricter oversight.
The Senate hearing primarily addressed the presidential budget request, allocating $2.6 billion to the SEC and $399 million to the CFTC for the upcoming fiscal year. These budget increases are intended to support the agencies in fulfilling their respective mandates through enhanced staffing and resources. In addition to budget allocations, Congress could grant the SEC and CFTC new authority through the FIT21 Act, which clarifies the roles of each agency in overseeing financial innovations. While FIT21 has passed the House, its fate in the Senate remains uncertain. Another proposal, the Lummis-Gillibrand Responsible Financial Innovation Act, seeks to broaden the CFTC’s jurisdiction but has not progressed since its reintroduction in 2023.