Trump Administration Considers CFTC as Primary Regulator for Crypto Market
President-elect Donald Trump’s administration is considering granting the Commodity Futures Trading Commission (CFTC) increased authority over the cryptocurrency market, particularly Bitcoin and Ethereum. This would reduce the Securities and Exchange Commission’s (SEC) regulatory role in digital assets.
The proposal suggests that the CFTC would oversee Bitcoin and Ethereum spot markets, categorizing them as commodities rather than securities. These cryptocurrencies represent approximately 70% of the global market, valued at about $2.24 trillion. The crypto industry generally favors the CFTC's less stringent regulatory approach, viewing it as a means to enhance innovation. Former CFTC Chair Christopher Giancarlo has indicated that the agency could regulate digital commodities immediately if adequately funded and led.
This initiative reflects dissatisfaction with the SEC's enforcement-driven strategy under outgoing Chair Gary Gensler, who faced criticism for aggressively targeting crypto firms. It also aligns with Republican goals of promoting innovation and reducing regulatory barriers. Transitioning oversight to the CFTC could clarify the ongoing debate regarding the classification of digital assets as either securities or commodities.
The SEC and CFTC have historically clashed over jurisdiction, leading to a fragmented regulatory environment that has prompted some crypto businesses to relocate overseas. While the SEC considers most cryptocurrencies as securities, the CFTC views Bitcoin and Ethereum as commodities, resulting in regulatory inconsistencies that hinder industry growth.
A bipartisan legislative effort known as the "BRIDGE Digital Assets Act," spearheaded by Tennessee Congressman John Rose, seeks to promote cooperation between the two agencies. The act proposes establishing a joint advisory committee of 20 private-sector representatives to align regulatory policies. It critiques the current enforcement-driven model, asserting it discourages U.S. innovation and encourages overseas investment.
CFTC Chair Rostin Behnam has expressed interest in broader crypto regulation, previously asserting the agency’s authority over Ethereum. Proposed changes might resolve disputes between the CFTC and SEC, notably the SEC's 2023 classification of all Proof-of-Stake tokens as securities, conflicting with the CFTC's view of Ethereum as a commodity.
The crypto community largely supports the CFTC taking the lead, viewing the agency as more conducive to crypto innovation compared to the SEC. One user remarked that “the SEC will no longer be able to strangle the crypto market,” highlighting the CFTC's focus on institutional players capable of handling risks.
Challenges persist, including the CFTC’s annual budget of $400 million and staff of 700, which are considerably smaller than the SEC’s $2.4 billion budget and 5,300 employees. To effectively manage the crypto spot market, the CFTC would need significant increases in funding and resources. Critics also express concerns about potential impacts on traditional CFTC stakeholders, such as agricultural commodity traders, necessitating careful legislative language to secure bipartisan support.
The shift in regulatory focus could provide clearer guidelines for the crypto industry and investors while diminishing conflicts between agencies. If implemented, a CFTC-led framework could significantly address regulatory uncertainty and promote growth in the U.S. cryptocurrency market. The Trump administration's plan, alongside bipartisan legislation, may redefine the regulation of digital assets, positioning the CFTC at the forefront.