Rostin Benham, chairman of the Commodity Futures Trading Commission (CFTC), has called for expanded regulatory powers to “combat the growing fraud in the cryptocurrency market.”
In his speech at the Futures Industry Association Expo 2023 on Monday, October 2, Benham highlighted the CFTC’s role in maintaining financial market integrity, especially in the context of decentralized finance (DeFi) where he took the opportunity to present his agency as a “neutral guardian of financial market integrity” and failed to properly explain how access to more regulatory power in the hands of the CFTC could help protect the market.
The speech focused on control measures for decentralized finance (DeFi) that would allow it to raid the DeFi cryptocurrency industry in an arbitrary manner as currently occurs with the Securities and Exchange Commission (SEC).
CFTC to Continue Cracking Down on DeFi and Crypto
While emphasizing the CFTC’s neutrality, Benham made it clear that the agency is ready to intensify its efforts against decentralized finance (DeFi) and cryptocurrency platforms. He did not hesitate to boast about the growing number of enforcement actions against cryptocurrency industry players in recent months and all that they had achieved. Benham stated:
“It has never been and will never be our job to pick winners and losers.”
He reiterated that the market and its participants should determine the value of innovations. Despite these assertions, Rostin Benham’s subsequent statements showed DeFi platforms as potential violators, justifying the strict measures taken by the CFTC.
These measures would leave decentralized exchanges and most DeFi platforms as non-compliant with CFTC requirements regarding their self-regulatory requirements (SROs) for market making organizations under the Commodity Exchange Regulation Act (CRA) making the entire DeFi market non-compliant and eligible for censure by the CFTC should they obtain the desired authority.
In addition, Benham took pride in the CFTC’s fight against fraud and illegal conduct related to digital assets. He revealed that a significant portion of its actions in the current fiscal year, 45 out of 131, focused on misconduct related to digital assets, which represents more than 34% of its cases since 2015 and is a step in a more positive direction.
He called the CFTC’s track record a result of its proactive stance, drawing an analogy to having licensed drivers on the road. He also praised the agency’s actions against Sam Bankman-Fried and troubled cryptocurrency exchange FTX, although they were among the few individuals and platforms mentioned by name.
The Impact of Defi on Regulation
The cftc is responsible for regulating derivatives markets, including cryptocurrencies, derives its authority from the Commodity Exchange Act. While it does not directly oversee the cryptocurrency spot markets, it plays a crucial role in regulating cryptocurrency derivatives, investigating fraud and educating investors about the risks associated with cryptocurrency trading.
Benham’s recent position gives much food for thought and raises concerns in the cryptocurrency space as while it is not an open war as is the case with the SEC, it does show an obvious intent to control and influence the cryptocurrency market by regulatory authorities and their enforcement laws, which goes against the nature of the DeFi space and the decentralized cryptocurrency economy.
In this context, it is important for cryptocurrency market participants to be prepared for further regulation. This could include compliance with new regulations, increased operating costs and decreased innovation.
Only time will tell how this situation will play out. However, it is clear that regulation will be a major issue for the cryptocurrency market in the coming years.