Recent regulatory actions and reports show the CFTC is more eager to oversee Non-security Cryptocurrencies

2022-10-26, 01:43

TL;DR

🔹 The crypto community often sees the SEC as a Valiian in the Crypto space and CFTC as a friendly government commission.

🔹 Recent actions have proven otherwise, as we see the CFTC taking more enforcement action related to digital assets.

🔹 In one of its latest enforcement actions, the Ooki DAO was sued on accusations that it offered leveraged and margined trading products without the proper government approvals or regulatory controls.

🔹 Over 20% of the 2022 crackdown by the CFTC was crypto-related.

Understand the purview of the commodities futures trading commission in the crypto space.

The Commodity Futures Trading Commission (CFTC) is a federal agency in the united states that regulates the derivatives markets, including futures contracts, options, and swaps. Established in 1974, one of its primary duties is to protect investors against manipulation and fraudulent practices. However, with the advent of fintech and digital currencies, the CFTC regulatory functions have become more complex. The CFTC has since played an active role in overseeing this emerging deviation from traditional derivatives, commodities, and option-related products.

It is also important to clarify that the CFTC performs different functions from the SEC. CFTC regulates the derivatives market, while the SEC regulates Securities in the united state.

In 2015, Bitcoin & other virtual currencies were defined as commodities under the U.S commodity exchange Act (CEA). In fact, The CFTC stated that individuals who had created exchange platforms for Bitcoin options were operating a facility for the trading or processing of swaps without registering as a swap execution facility or contract market. Also, In October 2019, CFTC Chairman Heath Tarbert shared his view that Ether; is a commodity and will be under the CFTC’s purview together with Bitcoin.

The perception of the CFTC relative to the SEC

Source: Coindesk

Though representing a governmental regulatory body, The chairman of CFTC is often seen to convey positivity and show his openness to the disruptive technology in the crypto space.

-“I think there are a few folks who wish this technology might go away, think it might go away, think it might go offshore, but I think there’s a number of reasons from a U.S. perspective that it’s important we engage [with the industry],” -Rostin Behnam.

On the contrary, the Chairman of the Security and Exchange Commission (SEC) is often perceived to be unfriendly or engage enforcement approach.

In light of the recent wave of enforcement by the CFTC, it will be misleading to think that the commission will take a light hand than the SEC in pursuing regulatory action in the crypto market.

According to CFTC Commissioner Caroline Pham in august,- “Anybody who thinks that the CFTC is not going to be tough might have missed when we fined all the banks billions of dollars for fraud and manipulation after the
Here are the most recent actions led by the CFTC.

Over 20% of the 2022 crackdown by the CFTC was crypto-related.

The federal regulator’s annual enforcement results show that the CFTC issued orders imposing over $2.5 billion in restitution, disgorgement, and civil monetary penalties, among which 22% of the enforcement actions in 2022 were crypto-related.

The Commission brought 18 actions involving conduct related to digital assets, including filing charges against Bitfinex for violation of order; Tether for misleading statements; the Digitex Futures native token for manipulation; swap execution facility (SEF) or futures commission merchant (FCM); charges against a DAO; addressed failures to register or seek designation as a designated contract market (DCM), and took on fraud, including a $1.7 billion fraudulent scheme.

These statements, among others, are a way to rewrite the narrative that the CFTC is not eager to pursue or enforce the law.

SEC Chairman, Gary Gensler, Says CFTC Should have more Oversight on Stablecoins

Gary Gensler has pointed out that the CFTC does not have direct regulatory authority over dollar-backed stablecoin issuers except in the areas of fraud and manipulation. He mentioned that CFTC should be given more authority to police non-security tokens.

Also, as anticipated in Senate legislation, the CFTC chairman is prepared to take the role of the major & fully funded watchdog for digital assets that are not securities. In his words- “The volatility in the market, and its impact on retail customers – which may only worsen under current macroeconomic conditions – emphasizes the immediate need for regulatory clarity and market protections.

Conclusion

Although it seems like the CFTC might be taking a lot on its table, the crypto market will still feel the impact of the SEC in its regulatory roles, as most of the current tokens are still defined as securities. However, Behnam has boasted that the CFTC brings in about $1.5 billion a year in fines from its enforcement actions in the last decade. -thus a good return for an average budget of about $240 million.

Author: M. Olatunji, Gate.io Researcher
* This article represents only the views of the observers and does not constitute any investment suggestions.
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