CFTC may become main regulator for crypto industry

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The Commodity Futures Trading Commission (CFTC) is garnering support to be the primary regulator for the crypto industry amongst stakeholders in the crypto industry and US lawmakers, Commissioner Summer Mersinger said during the Reuters Commodities Trading USA conference in Houston.

The CFTC commissioner continued that the commission is also reviewing its potential roles in the crypto industry, especially in areas such as spot-market crypto trading. However, the reviews are still at the preliminary stage.

In his words,

We are still a strong regulator, but our registrants have a lot of flexibility. They have been very interested in that approach versus the top-down way of some other financial regulators.

Several crypto exchanges have revealed their preference for the CFTC to be the principal regulator of the crypto space. The CEO and founder of FTX, Sam Bankman-Fried, has been lobbying the US Congress to give the CFTC a bigger role in overseeing the industry.

Meanwhile, a newly proposed bipartisan bill by Senators Kirsten Gillibrand and Cynthia Lummis wants to regard cryptocurrencies as commodities that should be placed under the purview of the CFTC.

Who should regulate the crypto industry? SEC or CFTC?

With the newly proposed bill pushing CFTC to the forefront of crypto regulations, experts in the industry have been divided over who should regulate the industry, with some arguing in favor of the Securities and Exchange Commission (SEC) while others push for CFTC.

The common perception is that the SEC has the most potential to oversee the crypto space because it has been at the forefront of regulating it.

Gives CFTC, which is very pro crypto, control over regulating all crypto deemed to be commodities (BTC, ETH, and likely half of all coins). This is good and big. The SEC has hurt crypto in the USA. BUT, It also means many coins will be securities regulated by the SEC.

— Lark Davis (@TheCryptoLark) June 8, 2022

According to Lark Davis, if CFTC becomes the official regulator for the crypto industry, this is “good and big” as “The SEC has hurt crypto in the USA.”

Katherine Kirkpatrick, the General Counsel for Maple Finance, says CFTC taking over the regulation of the industry is good and bad.

1/ After carefully reviewing the L-G bill, a few thoughts on its application to #DeFI. 1) CFTC auth. is good & bad – good to cede authority to less aggressive SEC, bad bc CFTC is under-funded and under-resourced, so query how the CFTC is going to keep up with rapid development.

— Katherine Kirkpatrick (@kkirkbos) June 8, 2022

Per her statement, it is bad because the CFTC is under-funded and under-resourced, so she wonders how the commission will remain atop the rapid development in crypto and DeFi.

On the other hand, Mark Hays, a senior policy analyst at Americans for Financial Reform, says the SEC should be responsible for overseeing the industry because

Most of the cryptocurrency activity out there walks, talks and acts like a security.