CFTC Chair Flags Spot Bitcoin ETFs Risks, Wants New Legislation

Commodity Futures and Trading Commission Chair Rostin Benham has flagged concerns around the recently approved spot Bitcoin ETFs and called for new legislation to regulate crypto. 

The remarks come just weeks after the Securities and Exchange Commission approved the first batch of spot Bitcoin ETFs, leading to billions of dollars worth of trading activity. 

CFTC Chair Flags ETF Concerns 

Benham made the remarks two weeks after the Securities and Exchange Commission approved the first batch of spot Bitcoin ETFs. The CFTC chair said he believed the approvals introduced several risks into the system and called for new legislation at the federal level. Speaking at an event organized by the American Bar Association, Benham put forward his concerns, stating, 

“I fear that the regulatory approval of bitcoin ETPs introduces risk that, in spite of yellow flags, market participants, retail and institutional alike, may mistake the technical approval of a product—with actual regulatory oversight of the cash commodity digital assets.”

Benham stated that Congress has granted no regulator authority to oversee cash markets for digital assets. He believes this is a major risk in itself, and he urged Congress to craft new regulations to help oversee crypto. Lawmakers have created several bills over the past few years, including one that would give the Commodity Futures and Trading Commission new authority over the cash markets. However, the bills are yet to garner the needed support. 

Concerns Are Now Magnified 

Benham has been calling for greater digital asset commodity spot market regulation for the past six years. He believes such a move would act as a precaution against issues such as conflict of interest and customer protection. Benham said the SEC’s decision to approve ETFs has considerably magnified his fears. 

“The concerns I have publicly voiced for the better part of six years regarding the digital asset commodity spot market have only become magnified. The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action. There is nothing firmly in place to “address the opaque and inconsistent practices in the cash markets for digital assets” around issues like conflicts of interest and customer protection. Instead, the ETPs have taken a speculative and volatile asset, wrapped it in a thin layer of indirect regulation, and packaged it as a shiny new product.”

SEC Still Does Not Endorse BTC 

Despite the recent spot Bitcoin ETF approvals, the Securities and Exchange Commission has stated it does not endorse Bitcoin. This was made clear in a statement made by SEC Chair Gary Gensler following the approvals, 

“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

Gensler also cautioned investors about the risks of crypto investing, such as market risk, fraud, and non-compliance. 

CFTC To Pursue Bad Actors 

Benham also pointed out that the CFTC has been going after bad actors and has become the premier enforcement agency in the digital asset space. Of the 96 digital asset-related actions in 2023, 47 were brought by the CFTC. Notable among these include actions against former FTX CEO Sam Bankman-Fried, Binance and its CEO Changpeng Zhao, and Celsius. 

“As everyone in this room knows, we can only act on digital asset fraud or manipulation when we uncover or discover anomalies through regulated market surveillance and oversight or through tips and complaints we can pursue. We are doing all this—and making the headlines—with a restrictor plate installed. Imagine what we could do if we were given the tools to open up the throttle?”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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