Trade body backs CFTC as home of US crypto regulation

Speaking to a US Senate Committee on the Federal Oversight of Digital Commodities, the chief exec and president of the FIA said the CFTC rather than the Securities and Exchange Commission (SEC) should regulate US digital assets.

Walt Lukken, a former commissioner and acting chair of the CFTC, told the Committee on Tuesday: “The US has two strong markets regulators in the SEC and the CFTC that can collectively bring digital asset securities and digital commodities into a proper regulatory framework.

“Based on my depth of experience on the Commission and Capitol Hill, I believe the Commodity Exchange Act (CEA) and the CFTC are well-suited for the oversight of the digital commodity markets,” he added.

Lukken was speaking during what has become known as Crypto Week in Washington where policymakers are considering various issues including the Clarity Act, which aims to establish a simple regulatory framework for US digital assets.

The FIA head went on to explain why the CFTC is better placed to oversee spot digital assets like bitcoin: “The listing of futures on digital commodities has already provided the CFTC with significant experience regulating the cryptocurrency markets.”

Lukken also cited the efficacy of the CFTC’s customer protection measures which were tested by the implosion of FTX, the spot and crypto derivatives market that disintegrated three years ago.

“These customer protections have held up as recently as the 2022 collapse of FTX, in which the only solvent part of that company was its CFTC-regulated derivatives clearing organisation, LedgerX.”

The FIA head also touched on the issue of conflicts of interest, pertinent because in crypto a single firm will often run the exchange, the clearing house and a broker to the exchange and clearing house.

The Washington-based trade body expressed in May 2022 concerns that scrapping the futures model involving legally distinct entities in the different roles “could undo the strong foundation of the listed derivatives markets and, ultimately, put customers at risk”.

Lukken said on Tuesday: “As such, we support legislative language that requires the CFTC to conduct rulemaking on managing conflicts of interest when these various registration categories exist in the same firm.”

The CFTC and the SEC, which regulates US equities, bonds and options, have for years been keen to stress their credentials as the natural home of the growing US digital assets market.

The FIA said last month the CFTC and the SEC should co-operate on rulemaking efforts to address the bifurcated regulatory approach that has emerged in recent years.

US President Trump picked in February Brian Quintenz, a former CFTC commissioner and crypto advocate, to be the next chairman of the CFTC.