The Trump administration, set to take office, is considering a significant change in how the U.S. regulates digital assets like Bitcoin and Ethereum. The plan is to give the Commodity Futures Trading Commission (CFTC) more authority over the $3 trillion digital asset market.
This would reduce the influence of the Securities and Exchange Commission (SEC), which currently handles much of the regulation.
The idea stems from President-elect Donald Trump and Republican lawmakers who believe the SEC’s strict rules under President Biden and outgoing SEC Chair Gary Gensler have hindered innovation in the crypto world.
The Commodity Futures Trading Commission oversees a huge $20 trillion market that includes trading in things like gold, oil, and financial contracts such as futures and options. Unlike the SEC, it is less strict because it mostly deals with big, experienced investors instead of everyday people.
The Trump administration wants to give the CFTC more responsibilities, including overseeing the direct buying and selling of digital assets like Bitcoin and Ethereum. These direct transactions happen in what is called the “spot market.“
Currently, both the SEC and the CFTC lack clear rules for handling cryptocurrencies. The SEC views most cryptocurrencies as similar to stocks or bonds, requiring them to follow strict regulations.
The SEC has sued numerous crypto companies for violating these rules, leading to confusion. Many companies are uncertain about compliance and have relocated to countries with clearer regulations.
The CFTC, on the other hand, treats Bitcoin and Ethereum as commodities and focuses on preventing fraud and market manipulation, though it doesn’t oversee their everyday buying and selling.
The CFTC is considered more supportive of innovation, allowing regulated trading of Bitcoin and Ethereum futures, which has attracted large financial institutions to the crypto market.
Read also: US bill proposes SEC-CFTC joint digital assets committee
There are ongoing discussions about whether the CFTC should take on a bigger role in regulating cryptocurrencies, including the spot markets where most people buy and sell them. If this happens, it could bring more clarity to the rules and help businesses grow in the U.S. without as much fear of lawsuits.
Chris Giancarlo, also known as Crypto Dad, is a former chairman of the CFTC who may be given a new role in the Trump administration as a crypto czar. He has been a strong advocate for the CFTC to take charge of regulating digital assets and played a key role in getting the agency to classify Bitcoin as a commodity in 2015. During his time as chairman, the CFTC also approved the trading of Bitcoin futures.
If the CFTC gets more power, it could oversee not just the assets but also the platforms where they are traded. This change would provide clearer rules for businesses and investors in the crypto space. However, to do this, the CFTC would need more funding and staff. Its 2024 budget of $400 million and 700 employees is much smaller than the SEC’s $2.4 billion budget and 5,300 employees.
