(Kitco News) – President-elect Donald Trump continues to make good on his campaign promise to reshape the face of crypto regulation in the U.S., with new reports indicating he plans to expand the power of the Commodity Futures Trading Commission (CFTC) and put the regulator in charge of overseeing the digital asset market.
According to FOX Business, the move would be part of Trump’s goal of limiting the power the Securities and Exchange Commission (SEC) has over the digital asset industry, which aggressively targeted the industry under President Biden and his outgoing SEC chairman, Gary Gensler.
The CFTC, which currently oversees the $20 trillion U.S. derivatives market, is widely perceived as having a lighter regulatory touch than the SEC, which would be a welcomed sight for crypto companies and investors.
If Trump has his way, the CFTC’s role could soon expand to include the regulation of spot markets for digital assets deemed commodities, the report said, along with the crypto exchanges they trade on, according to sources with direct knowledge of the Trump team's thinking.
While there are already upwards of 50 million Americans holding digital assets, Trump would like that number to be higher and believes that less stringent regulation is needed to spur innovation in the crypto ecosystem.
“With adequate funding and under the right leadership, I think the CFTC could hit the ground running to begin regulating digital commodities on day one of Donald Trump’s presidency,” former CFTC Chairman Chris Giancarlo told FOX Business.
If the plans to give the CFTC oversight of the spot crypto markets are implemented, it would be a major step towards providing regulatory clarity for companies and individuals involved in the trading of digital assets, as there are currently no clear regulations laid out defining who has jurisdiction over spot market transactions.
Because of this, both the SEC and CFTC have had to resort to enforcement actions in their efforts to regulate, a development many in the industry have pushed back against as it amounts to a choice between not developing and progressing forward or being sued.
One of the biggest debates that Trump looks to help settle is the question of whether digital assets qualify as securities or commodities. Over the past three years, the SEC has largely operated from the standpoint that most cryptocurrencies besides Bitcoin are securities, making both the regulator and Chair Gensler largely unpopular with the U.S. crypto industry and causing it to favor the CFTC as a primary regulator.
As part of his efforts to reshape the regulation of cryptocurrencies, Trump is considering Giancarlo for the role of “crypto czar” in his new administration after the regulator, who is also known as “Crypto Dad” to many in the industry, served as chair of the CFTC during Trump’s first term.
The crypto czar role would be tasked with helping to execute crypto policy and potentially oversee an industry-led advisory council.
Giancarlo has long supported the digital asset industry and previously called for the CFTC to oversee the asset class. In 2022, he sent a letter to the Senate Agriculture Committee, which oversees the CFTC, voicing support for the agency having spot crypto authority, emphasizing its early engagement with digital assets dating back to 2015 when it labeled Bitcoin as a commodity. The CFTC approved futures trading for the price of Bitcoin under Giancarlo’s helm.
But putting the CFTC in charge of digital asset oversight may already be in the works as outgoing CFTC Chairman Rostin Behnam asked the agriculture committee at an oversight hearing in July for extra funding to start regulating the crypto markets more effectively than through enforcement.
According to Behnam, nearly 50% of the agency’s enforcement actions this year were brought against crypto businesses, a figure he called a “staggering statistic” for an agency with no mandate to regulate the industry.
Congress still needs to approve the additional funding, and Behnam has argued that the funds are crucial for the CFTC to begin policing fraud and manipulation in the spot crypto markets. With a 2024 operating budget five times smaller than the SEC, the regulator lacks the workforce to effectively oversee the industry.
Trump has not yet nominated someone to replace Behnam as head of the CFTC, but a handful of names have been floated, including current GOP commissioners Caroline Pham and Summer Mersinger, both pro-crypto candidates who often speak at industry events.
While the crypto community is excited about the CFTC taking a larger role in oversight of the industry, many traditional CFTC constituencies worry that it could lead to expanded oversight in other markets, such as the regulation of physical and agricultural commodities, which fall under the jurisdiction of other agencies like the Department of Agriculture.
Giancarlo says those concerns would need to be addressed using specific language in any new legislation giving the CFTC spot authority over digital commodities.
Trump’s ultimate goal is to restructure the relationship between the two main financial regulators, the report said, encouraging them to work together on certain crypto policies like enforcing stablecoin regulation. He also wants the SEC to move away from its extensive rule-making agenda and progressive leanings, which resulted in the departures of many senior officials and a disgruntled employee union.
“There’s a lot of work to be done at the SEC – many of its top talent has left the building, so we need to get it functioning again and refocus its mission to a pro-innovation agenda,” Giancarlo said.
Previous reports suggested that Trump was looking to appoint Giancarlo as the next SEC Chair to aid in these efforts, but Giancarlo, who took over as CFTC Chair following Gensler’s tenure, told the Trump transition team explicitly that he didn't want to “clean up the mess left by Gary Gensler for a second time.”
Along with being pro-crypto, Trump is looking to appoint an SEC Chair who can bring a new approach to all of the regulator's duties, including policing the $100 trillion securities markets comprised of stocks, bonds, mutual funds, treasuries and more.
“The SEC has great bones, but whoever leads it next will need great policy chops as well as great admin skills to bring it back to being a contributing part of an administrative agenda,” Giancarlo said.
