Coinbase has urged Congress to grant the Commodity Futures Trading Commission (CFTC) authority over the spot market for digital assets.
This push aligns with ongoing discussions about filling regulatory gaps in the crypto industry, which currently operates without a dedicated federal agency overseeing non-securities digital asset trading.
Faryar Shirzad, Coinbase Chief Policy Officer, stated that Congress should give the Commodity Futures Trading Commission (CFTC) the authority to oversee the crypto spot market. Bitcoin and Ethereum are commodities, not securities, so the CFTC should regulate their trading to ensure fairness and prevent fraud.
This is similar to the call by the former CFTC Chair, Rostin Behnam who has been vocal about the need for stronger oversight. He said that the absence of clear rules has led to increasing cases of fraud, market manipulation, and financial instability in the crypto sector.
He argued that granting the CFTC jurisdiction over the spot market would provide much-needed legal certainty and investor protections.
The Commodity Futures Trading Commission (CFTC) is a U.S. government agency that regulates derivatives markets, including futures, options, and swaps. It ensures these markets operate fairly, transparently, and free from fraud or manipulation.
The CFTC was created in 1974 to oversee trading in commodities like oil, wheat, and metals. Over time, as financial markets evolved, its role expanded to cover complex financial products, including cryptocurrency derivatives (like Bitcoin futures).
The confusion over whether Bitcoin and Ethereum are securities or commodities comes from a jurisdictional dispute between the US Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission (CFTC).
Although the SEC has not directly classified Bitcoin as a security, Gensler has repeatedly suggested that most cryptocurrencies except Bitcoin should be regulated as securities. In 2018, former SEC Director William Hinman stated that Ethereum was not a security due to its decentralized nature.
However, in recent years, before Gensler resigned, he has avoided confirming whether Ethereum remains outside SEC regulation, especially after Ethereum moved to a proof-of-stake (PoS) model, which could make it resemble a security in the SEC’s view.
The CFTC, which regulates commodities and derivatives markets, has consistently classified Bitcoin as a commodity and has also suggested that Ethereum falls under its jurisdiction. The agency oversees Bitcoin and Ethereum futures markets and has argued that these digital assets function more like gold or oil than securities. CFTC Chair Rostin Behnam has stated that both Bitcoin and Ethereum are commodities under the law.
The SEC and CFTC have overlapping authority in financial markets, leading to confusion over who should regulate cryptocurrencies.
The SEC believes Ethereum may now be a security due to its staking rewards system, while the CFTC continues to treat it as a commodity and oversee its futures trading. This uncertainty has left crypto companies in a regulatory gray area, with no clear legal framework.
Congress has yet to pass laws that clearly define whether Bitcoin, Ethereum, and other digital assets are securities or commodities. Until lawmakers act, the SEC and CFTC will likely continue to battle for control, creating uncertainty for crypto businesses and investors.
Some industry leaders, including Coinbase, have urged Congress to grant the CFTC clear authority over the crypto spot market to alleviate this confusion.
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Coinbase’s appeal aims to eliminate this uncertainty. Its officials have also asked Congress to clearly define digital assets and transactions. Crypto investors, developers, and businesses need clear rules.
The Coinbase policy chief emphasized the need for lawmakers to clearly define which digital assets are securities and which are commodities, along with their regulatory frameworks. This approach aims to protect investors while fostering innovation.
He recommended that the Securities and Exchange Commission (SEC) should establish clear guidelines for crypto projects seeking to raise funds. Currently, every new token faces the risk of being classified as a security, which hampers innovation. New rules could enable developers to raise funds legally without undue restrictions.
He urged lawmakers to develop a framework for stablecoins. These digital currencies, pegged to traditional money like the U.S. dollar, are crucial to the crypto economy. Regulations should mandate that stablecoins be fully backed and transparent while also promoting competition.
The Coinbase chief called on Congress to protect decentralized finance (DeFi) and digital commerce. Essential blockchain innovations like DeFi protocols, smart contracts, and NFTs should not be overregulated, he believe.
Meanwhile, centralized platforms holding customer funds should be appropriately regulated at the state or federal level to ensure accountability.
