SEC And CFTC Talk More About Crypto Regulation At ISDA Meeting

May 13, 2022 6:17 pm

The chairs of the SEC and CFTC recently talked about their stances on the crypto industry at the ISDA meeting which the CEO of the FTX Exchange also attended.

The ISDA meeting is an annual meeting which was held in Madrid this year where the chairs of both organizations attended as keynote speakers.

Rostin Behnam, chair of the CFTC, made several references to the current regulatory environment and listeners have recalled that the CFTC has had authority over cash markets in the past such as the time where it imposed a fine on Coinbase for improper reporting of exchange volume.

The keynote speech did not explicitly reference the proposed bill that the CFTC would start gaining more authority over the digital asset space although some investors believe that it was referenced in an indirect way.

CoinTelegraph reports:

Behnam went on to recall his February Senate testimony to say:

“I will continue advocating for and supporting legislative authority for the CFTC to develop a regulatory framework for the cash digital asset commodity market.”
Currently, the CFTC only regulates derivatives markets, although it has exerted enforcement authority over cash markets, such as the fine it imposed on Coinbase for improper reporting of exchange volume and “self-trading” in 2021.
Gensler spoke about “the intersection of crypto assets with derivatives” in his significantly shorter speech. He said:

“If platforms — whether in the decentralized or centralized finance space — offer security-based swaps, they are implicated by the securities laws and must work within our securities regime.”

As for Gensler, it was expected that he would continue pushing the SEC’s agenda which is that all securities need to be in compliance with securities laws without giving any clear guidelines on what would be considered a security.

Gensler had also doubled down on the position recently that crypto should be regulated in the same way as securities.

As a result, there is the push to have more enforcement over the industry which will likely impose harsh restrictions for crypto investors within the country.

However, the claims did not resonate with some prior actions as it seems that the SEC has not imposed the same enforcements for some digital assets like Ethereum, which was quite different from its treatment towards XRP.

CryptoPotato reports:

If American lawmakers determine cryptocurrencies to be securities, companies dealing with them would come under the stringent regulation, and registration requirements that firms offering securities are subject to.

According to Gensler, if a derivative contract known as a swap is based on a crypto asset, it is a security-based swap and subject to SEC registration, he added:

“It’s important to recognize that if the underlying asset is a security, the derivative must comply with securities regulations.”
The SEC Chair also wants to see decentralized exchanges that offer derivatives registered with the agency.

Those opposing this line of thinking, such as Senator Cynthia Lummis and Senator Kirsten Gillibrand, believe that crypto assets are commodities and should be regulated by the CFTC.

These comments come during a time right after the SEC reported that they would be increasing the number of staff on their crypto division unit.

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