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CFTC Chair Rostin Behnam Says Stablecoins Are Commodities At Senate Agriculture Hearing

Rostin Behnam, CFTC

Today’s Commodity Futures Trading Commission (CFTC) oversight hearing by the Senate Agriculture Committee was broad in its remit as CFTC Chair Rostin Behnam provided an overview of the latest and greatest at his agency.

Video is here.

Chairwoman Sen. Debbie Stabenow’s (D, MI) opening remarks made clear digital assets were on the agenda with an allusion to recent events in digital assets such as the FTX implosion saying, “The massive customer losses caused by this misconduct highlight exactly why we need federal oversight of the crypto industry, and I remain committed to working with my colleagues to hold crypto companies to the same rules as traditional financial firms.”

In spite of the beginning of the hearing, the Digital Commodity Consumer Protection Act (DCCPA) was barely discussed thereafter as was any new specific new digital assets legislation that could come out of Senate Ag.

Ranking Member Sen. Boozman (R, AR) followed with his opening remarks which were complimentary of the CFTC and Behnam. The remarks briefly touched on digital assets: “I am confident the CFTC is suitable for an expanded role in regulating the digital commodity spot market. I am committed to working with Chairwoman Stabenow and our colleagues to create the safeguards the market needs.” Also, Sen. Boozman said that he appreciated the CFTC’s use of “No Action” letters in managing commodity and futures markets perhaps reflecting a more “light touch” approach to regulation by Republicans.

CFTC Chair Behnam built on Stabenow’s and Boozman’s themes and expressed the continued need for comprehensive regulation in digital assets in his opening remarks. He repeated what he has said many times before: “In the absence of direct regulatory and surveillance authority for digital commodities in an underlying cash market, our enforcement authority is by definition reactionary; we can only act after fraud or manipulation has occurred or been uncovered.”

Opening statements:

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Senate Ag Committee Attempts To Resuscitate DCCPA, Distance From FTX

Senate Ag hearing

With the collapse of cryptocurrency exchange FTX not even a month old, the first FTX hearing commenced on Capitol Hill with the Senate Agriculture Committee questioning Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam yesterday in Washington D.C.

Overall, the hearing seemed to be a theater of positioning by Senate Ag intended to address…

    • Urgency – Senate Ag and the CFTC appeared to believe the Digital Commodity Consumer Protection Act (DCCPA) has more urgency than ever in light of the FTX collapse.
    • Overcoming the conflict of interest – Senate Ag and the CFTC endeavored to distance themselves from FTX and its founder Sam Bankman-Fried (SBF). The unspoken message is that FTX did not influence the creation of the DCCPA. On that note – and grasping for transparency, for example – CFTC Chair Behnam’s calendar in the past year was under the microscope which included 10 FTX meetings largely related to its subsidiary LedgerX and its DCO application – not DCCPA.
    • Refinement– Chair Rostin Behnam and Committee members urged that learnings from FTX’s implosion be incorporated into the new bill. In some ways, the refinement appears to be finding a way to bring companies like FTX onshore, which would have required the company to adhere to regulations that would have prevented the implosion in the first place.
    • Pause – In spite of the urgency, the need for refinement requires pause. DCCPA won’t be heading for a vote on the Committee or Senate floor until next year at the earliest. Chair Behnam advocated as much.

Hearing context

On its face, D.C. appears to be in soul-searching mode as it gropes for answers on how the FTX collapse occurred even though the company was based in the Bahamas. The krux of the concern, though, stems from the humiliation endured by unsuspecting lawmakers who had been courted and cajoled by FTX founder and CEO Sam Bankman-Fried.

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Chair Rostin Behnam Amps Up CFTC’s Mission in Crypto

This afternoon, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam participated in a webinar with think tank Brookings Institution titled, “The future of crypto regulation.”

Chair Behnam began with a speech making clear his belief that the CFTC is ready to regulate the cryptocurrency space.

“Regulators must be nimble, and new challenges may require us to dig deeper, take a different look into how our organic statutes promote our growth alongside the markets we regulate. In the absence of new legislative authority, we at the CFTC continue to look at how we can work to protect markets and investors within the bounds of our existing authority. We have (and will forcefully utilize) our fraud and manipulation enforcement authority. But, given the regulatory vacuum, we are also thinking creatively about how else we can use our existing regulatory authority to protect retail commodity markets and investors. Make no mistake: we will use all levers at our disposal, and all relevant authorities to continue rooting out fraud and manipulation.”

Read entire speech here (PDF).

Two main updates included elevating the importance of LabCFTC:

“LabCFTC is evolving in new ways and will take on a new identity as the Office of Technology Innovation (OTI) with an updated operating model.  There is now a real intersection between the financial innovations and our markets that did not exist even a few years ago when former Chairman Giancarlo ambitiously and appropriately established LabCFTC as a means to accelerate CFTC engagement with fintech innovators.  As I testified in February, we are past the incubator stage, and digital assets and decentralized financial technologies have outgrown their sandboxes (…) OTI will also have an opportunity to evolve within its new structure and have flexibility to meet needs both internally at the Commission and externally in the regulatory space and in the markets.”

And the second update appears to align with education and consumer protection:
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