The outgoing Chair of the Commodity Future Trading Commission (CFTC) has cautioned future US regulatory leadership about oversight of crypto in an interview with Politico.
Rostin Behnam announced on 7 January that he will officially step down from the CFTC leadership role on 20 January, with his final day in the role being 7 February. His final weeks in the position will cover the inauguration of Donald Trump as US President.
In a statement on the CFTC website, Bahnam said that he will “work closely with President Trump’s team to ensure a smooth and orderly transition”. Trump’s second tenure as President is expected to usher in a new era of financial regulation, particularly around cryptocurrencies.
This will be particularly significant for the CFTC, one of the major financial regulators in the US, tasked with overseeing futures, swaps and certain kinds of options. Trump is famously in favour of a hands-off approach to regulation, and in some cases, has been actively confrontational with regulators.
The CFTC has escaped Trump’s ire for the most part, with the outspoken businessman and Republican politician largely focused on the Securities and Exchange Commission (SEC) and its Chair, Gary Gensler.
Trump has repeatedly stated that Gensler’s tenure as SEC Chair will end under his second presidency. It is also expected that the CFTC will take on a greater role in directly regulating and overseeing the extensive US crypto market, valued at well over $1bn with over one in 10 Americans owning crypto.
Separate from his leaving statement, however, Bahnam has warned about gaps in US crypto regulation, which he believes needs to be filled as the sector continues to grow. Events over the past few years have highlighted the importance of closely monitoring crypto.
The collapse of FTX in 2022 and the subsequent trial and conviction of its founder, Sam Barman-Fried, and the money laundering charges against Binance CEO Changpeng Zhao, are the two biggest scandals to mar the sector in recent years.
Meanwhile, the substantial growth enjoyed by crypto, particularly Bitcoin, in terms of both value and ownership, will make it even more important to monitor the sector. The election of the pro-crypto Trump as President is, interestingly, also one of the factors that contributed to this growth.
In his interview with Politico, Bahnam said: “We’ve seen this before in our history where we leave large swaths of finance outside of oversight and responsibility, and we have seen time and time again that it ends badly.”
The outgoing CFTC Chair did stress that he does not believe that the crypto market is significant enough to cause a financial crisis – but it is big enough that a significant enough development in the market “could have an impact and accelerate a crisis or a change in market volatility”.
Whether or not Bahnam’s calls for greater regulation of crypto will be heeded by the new Trump administration of course remains to be seen – the president has not fully returned to the White House yet, with his inauguration scheduled on Monday 20 January.
As already noted, Trump’s era is expected to usher in a new regulatory era which will see the CFTC take on more responsibility for crypto. This could empower the regulator to fill the so-called gaps in crypto regulation identified by Bahnam in his recent interview. In his departure statement, he also noted the CFTC’s adeptness at addressing regulatory gaps.
“Over the past several years, a multitude of domestic and global events tested the resilience of all financial markets,” he said.
“I am proud that the Commission consistently made deliberate and intentional decisions to ensure continued strength. We worked to address regulatory gaps and uncertainty. We also responsibly engaged new entrants to support innovation.”
On the other hand, as already mentioned, Trump is not the biggest fan of over-regulation, for want of a better term. He also actively courted votes from an increasingly politically-minded crypto sector during last year’s election, and so may be more sensitive to regulations that could go against the interests of Republican-voting crypto holders.
