CFTC Renewed: What Biden’s New Agency Chooses For Crypto Regulation


On September 14, United States President Joe Biden unveiled his choices to fill two vacant seats on the United States Commodity Futures Trading Commission (CFTC). In addition, the president appointed Rostin Behnam, who heads the derivatives regulator as interim president since January, to assume his duties on a permanent basis.

The nominations are unlikely to face serious hurdles on the path to confirmation, as candidates will need to secure a simple majority vote in a Senate currently controlled by Democrats. What can the crypto industry expect from the CFTC if Behnam assumes the permanent chairmanship and if Kristin Johnson and Christy Goldsmith Romero join the agency as commissioners?

Strengthening the commission

In 2015, the CFTC came forward and defined Bitcoin (BTC) and other digital currencies as commodities under the US Commodity Exchange Act, joining the ranks of US government agencies engaged in the regulation of the cryptocurrency space. The agency also asserted its jurisdiction in cases where “a virtual currency is used in a derivative contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.”

The CFTC, which is designed to be five-member when fully staffed, has been reduced to an interim chair and two commissioners this year. Heath Tarbert, the former president, left in March and Brian Quintenz resigned at the end of August. In addition, Dan Berkovitz, one of the remaining commissioners, announced his intention to leave on October 15.

The appointments come as the Biden administration comes under fire for taking its time to fill vacancies in several key regulatory bodies, including the CFTC. If confirmed, the new additions to the agency will give Democrats a 3-1 majority on the panel.

From interim president to permanent president

Acting President Behnam has been with the CFTC since July 2017, when he was sworn in as commissioner. In the service of crypto-savvy President Giancarlo, Behnam has spoken positively about digital currencies and their transformative potential on several occasions.

On the one hand, speaking at a regulatory summit in 2018, Behnam felt that cryptocurrencies – or virtual currencies in CFTC jargon – must become “a part of any economic practice. country, anywhere ”, correctly observing that“ some places, small economies, can become dependent on virtual assets to survive. Finally, Behnam recognized the limits to the reach of regulators if digital currencies continue to proliferate:

“These currencies will be outside traditional monetary intermediaries, such as the government, banks, investors, ministries or international organizations.”

Most recently, the acting CFTC boss spoke about the need to maintain a constructive conversation between fintech policy makers and innovators and the urgency of keeping American innovation at home. In remarks in March 2020 regarding Commission action related to crypto, Behnam said:

“I have long advocated for a more inclusive conversation regarding the advent of FinTech, believing that a thorough review and discussion of technology within our current legal and regulatory framework will best serve technologists, market players and consumers. clients. “

Sounds like what the industry expects, doesn’t it? However, it would be premature to base on these statements alone the expectations of the future policies of the derivatives regulator. After all, like any US financial regulator whose statutory objective is primarily the protection of market participants, the CFTC can always be expected to err on the side of caution when innovation is perceived to be at odds. with consumer safety.

Commenting on the recent settlement between BitMEX with the CFTC and FinCEN, Behnam noted, “The CFTC will take prompt action when activities impacting CFTC’s jurisdictional markets raise customer and consumer protection concerns. “

New commissioners

Biden’s two picks for vacant CFTC commissioner seats are Kristin Johnson, professor of law at Emory University, and Christy Goldsmith Romero, current special inspector general of the Troubled Asset Relief Program, a federal enforcement agency. of the law that deals with financial crimes related to the US government bailout program. .

Professor Kristin Johnson’s recent work focuses on the implications of emerging financial technologies, including distributed digital ledger (DLT) technology and artificial intelligence (AI) for financial regulation. Prior to her academic appointments at Emory and, prior to that, Tulane, she worked in corporate finance, most notably as Legal Assistant and Vice President at JP Morgan.

As TARP Inspector General, Christy Goldsmith Romero is investigating crimes against financial institutions related to bailouts carried out under the program. In this role, she works closely with the SEC, an agency where she previously served as a senior advisor in the law enforcement division.

Great expectations

At first glance, the trio appear to be a winning combination of an innovation-friendly president, a lawyer with a deep understanding of advanced financial technology, and an expert financial crime investigator.

Daniel Davis, partner at Katten Muchin Rosenman LLP and former CFTC general counsel, believes that each of Biden’s choices has the potential to bring positive changes to crypto regulation. Acting Chairman Behnam, if he takes office on a permanent basis, will be in an excellent position to move the regulatory conversation forward.

Related: Slow Start: Crypto Regulators Are Lagging The Blockchain Industry

On top of that, Ms Johnson and Ms Goldsmith Romero each bring excellent crypto-related credentials to their potential roles as commissioners. Davis further noted regarding the two nominees:

“Both have taught law classes related to cryptography. Ms Johnson has also written extensively on topics such as financial services regulation and how decentralized finance (DeFi) could fit into the current regulatory structure with innovative ideas. One would expect crypto-related issues to be a significant part of their respective agendas if confirmed. “

From this perspective, it is indeed tempting to view future CFTC reinforcements with optimism, but with some reservations. On the one hand, as the example of current SEC boss Gary Gensler shows, knowing digital finance and teaching blockchain courses at a top university doesn’t necessarily mean becoming the ally of the crypto industry when the person takes on a high position in a regulatory body.

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