The ongoing crypto crash has caused the Commodity Futures Trading Commission (CFTC) to boost calls for regulation.
The CFTC Wants to Oversee Crypto Activity
Back in 2014, then chairman of the CFTC Timothy Massad explained to a committee:
The [Commodity Exchange Act] defines the term commodity very broadly so that in addition to traditional agricultural commodities, metals, and energy, the CFTC has oversight of derivative contracts related to Treasury securities, interest rate indices, stock market indices, currencies, electricity, and heating degree days to name just a few underlying products. Derivative contracts based on a virtual currency represent one area within our responsibility.
Bitcoin is currently labeled a commodity, meaning the CFTC ultimately should have sway when it comes to regulating the asset. However, at the time of writing, it is much more regulated like a security given the amount of capital gains taxes one must pay on their holdings should they see their stashes go up.
The topic of regulation is a controversial one. On the one hand, it can be seen as a necessity to make crypto mainstream and legitimate. The space is still very much marred by fraud and crime and implementing the proper security protocols may help to alleviate some of these troubles.
However, there are many out there that say regulation goes against the very notion of crypto. They say the industry is designed to provide people with full financial autonomy and independence and having third parties regulating the space could get in the way of this.
Right now, it appears the only real crypto product that falls into the CFTC’s present jurisdiction is any sort of futures trading contract. The agency clearly states:
[T]he CEA only requires the existence of futures trading within a certain class… in order for all items within that class… to be considered commodities.
Keeping Digital Currencies in Their Place
Current CFTC chairman Rostin Benham is now looking to make the organization stronger when it comes to crypto coverage. He stated in a recent confirmation:
I think it’s important for this committee to reconsider and consider expanding authority to the CFTC… The CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market. Fundamentally, the CFTC is a market regulator that ensures market integrity and vibrancy aimed at supporting financial stability while ensuring individual customer protections through principles-based oversight of exchanges, clearinghouses, data repositories, and market participants. This flexible approach has allowed the CFTC, with authority from Congress, to evolve along with the derivatives markets from their historical roots in overseeing agricultural markets to now overseeing markets in everything from energy and precious metals to financial indices and swaps, and we now stand ready to do the same within the digital asset commodity market.
Since last November, bitcoin has lost roughly 70 percent of its value.