Bringing crypto market ‘into the light’ doesn’t address enforcement: CFTC chair

“Bringing this market into the light … will only allow us to see what’s going on underneath the hood,” said Rostin Behnam.

Commodity Futures Trading Commission chair Rostin Behnam is looking to members of Congress to address the Commission’s lack of enforcement authority in the digital asset space.

At a Wednesday hearing titled “Examining Digital Assets: Risks, Regulation, and Innovation,” Behnam told lawmakers with the Senate Committee on Agriculture, Nutrition, and Forestry that the CFTC’s authority was currently limited to addressing fraud and themanipulation of digital assets without a clear regulatory framework. The CFTC chair added that because there was currently a patchwork of regulation and enforcement authority across multiple government agencies, the bulk of the agency’s actions taken in the last seven years “have largely relied on tips and whistleblowers” who brought crypto scams and other illicit activities to the CFTC’s attention.

“We have a number of exchange-traded derivatives on crypto assets on several registered CFTC exchanges, but the visibility to the underlying market is limited at most,” said Behnam. “In essence, this is an unregulated market […] there is so much that we are not able to see because of this limited authority.”

The CFTC chair added:

“We don’t have any of these very advanced tools to monitor markets so it’s giving us a very, very narrow lens into what is actually happening in the market. This is why I think as you contemplate more regulatory authority for the CFTC, bringing this market into the light so to speak with more transparency will only allow us to see what’s going on underneath the hood.”

Behnam, who served as acting chair of the CFTC since January 2021 before being confirmed by the Senate last month, has previously likened the government agency’s enforcement of the digital asset space to a beat cop on duty. With Behnam serving as chair, the CFTC has been a part of enforcement cases against crypto derivatives exchange BitMEX — in which the firm agreed to pay a $100 million civil monetary penalty — and Tether and Bitfinex, which the commission fined $42.5 million in October.

“There is no one regulator, either state or federal, with sufficient visibility into digital asset commodity trading activity to fully police conflicts of interest and deceptive trading practices impacting retail customers,” said Behnam in his written statement to the committee.

Related: US lawmakers urge CFTC and SEC to form joint working group on digital assets

The second panel of the hearing of the Senate Agriculture Committee will give lawmakers the opportunity to address industry experts including FTX US CEO Samuel Bankman-Fried. On the other side of the hill, House members of the Committee on Financial Services gathered to discuss the recommendations from the President’s Working Group on Financial Markets report on stablecoins on Tuesday.