| With outright bans in several countries, it seems that the time to provide a comprehensive regulatory framework for crypto has arrived.
But in the United States, the issue has turned into somewhat of a turf war between two agencies.
Part of the problem lies in how, exactly, to define digital currencies. Are they commodities, thereby falling under the jurisdiction of the Commodities and Futures Trading Commission (CFTC), or are they securities, and therefore under the purview of the Securities and Exchange Commission (SEC)?
At the moment, the issue is high on the priority list for both the SEC and CFTC commissioners.
The SEC has taken regulatory action, and in 2021, there were 20 enforcement actions related to cryptocurrency.
SEC Chair Gary Gensler has stated that "if you're raising money from the public, and the public is in anticipation of profit," based upon the efforts of promoters, sponsors or other members of the community, that falls under securities laws. He emphasized that investors must be protected from dishonesty and fraud.
“If you are a platform and you have 75, or a hundred, or 5,000 tokens on the platform, the possibilities are that a number of them, and maybe many of them, are what’s called a security," Gensler stated recently.
Meanwhile, CFTC Chairman Rostin Behnam has also been making efforts to increase his agency's ability to regulate the digital currency space.
Earlier this month, he testified before a Senate committee, noting that the agency he heads up is the "primary regulator" of U.S. derivatives markets, and that the CFTC needs to have a thorough understanding of the underlying cash markets, whether they involve raw materials or digital assets, in order to do its job.
Behnam emphasized that while judicial rulings have helped clarify the agency's authority regarding digital assets, that "cannot be viewed as a viable substitute for a functional regulatory oversight regime for the cash digital asset market."
Behnam stated that "The CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market."
The CFTC has also taken action in the space, including fining Kraken for “illegally offering margined retail commodity transactions in digital assets, including Bitcoin, and failing to register as a futures commission merchant.”
Another variable complicating the matter is the status of crypto exchanges, which have been coming under increased scrutiny. The SEC recently proposed amending and broadening the definition of “exchange.”
This is timely, as when I was writing this article, the SEC announced it was examining two market makers that trade cryptocurrencies on Binance’s U.S. exchange. | 