Trump Administration Aims to Put CFTC at the Forefront of Crypto Asset Regulation

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Trump Administration Aims to Put CFTC at the Forefront of Crypto Asset Regulation

The Trump administration plans to grant new powers to the Commodity Futures Trading Commission (CFTC) as a regulator for a significant portion of the cryptocurrency market. According to FOX Business, the aim of Trump and the Republicans is to reduce the regulatory power that the Securities and Exchange Commission (SEC) has exercised during President Biden's administration and under the departing SEC chairman Gary Gensler.

The CFTC is responsible for overseeing the $20 trillion derivatives market in the United States and is known for its lighter regulatory approach. The new administration under Trump wants to empower the CFTC to regulate the spot markets for crypto commodities, particularly Bitcoin and Ethereum. The increasing influence of the crypto industry is highlighted as a key factor driving this move.

According to FOX Business, with Trump taking office, the CFTC's regulatory role over spot markets could be expanded. Former CFTC Chairman Giancarlo, known as the "Crypto Dad," has long argued that the agency should enhance its influence over cryptocurrencies. He states that with sufficient funding and the right leadership, the CFTC could begin regulating digital commodities immediately.

Currently, it appears that rather than writing definitive rules to regulate crypto assets, the SEC and CFTC prefer to regulate through enforcement actions. Under Gensler's leadership, the SEC has enforced strict regulations on the sector by asserting that most cryptocurrencies are securities. This situation has reinforced the view that the CFTC is a more appropriate regulator for the sector.

It has been noted that the CFTC requires additional funding to more effectively regulate the crypto markets. While the CFTC's budget for 2024 is set at $400 million, the SEC's budget is determined to be $2.4 billion. Traditional CFTC stakeholders are concerned that the agency's new powers may impact its existing physical and agricultural commodity regulations.

Granting the CFTC authority to regulate the crypto spot market requires legislative action, leading to speculation about how legislative bodies will delineate the agency's scope of authority.

While Trump plans to expand the CFTC's regulatory role toward cryptocurrencies, he is also considering making fundamental changes to the culture at the SEC. As many officials resign under Gensler's leadership, there is a call for the agency to focus on a pro-innovation agenda. The identity of the new SEC chairman remains uncertain, but it is emphasized that they should be crypto-friendly.

Giancarlo is reportedly considered for the "Crypto Czar" role, which, although still unclear, could play a significant function in the implementation of crypto policy. The future role of the SEC within this new framework and the progress of the restructuring process are eagerly awaited.