A commissioner for the US Commodity Futures Trading Commission (CFTC) has detailed how crypto assets are regulated in the US and whether they fall under the jurisdiction of the CFTC or the Securities and Exchange Commission (SEC). “There has often been a grossly imprecise oversimplification” of how crypto assets are regulated in the United States, the commissioner said.
How crypto assets are regulated in the US
CFTC Commissioner Dawn D. Stump made it clear last week how crypto assets in the US are regulated by the CFTC or the SEC.
“The recent popularity of crypto products and other digital assets has drawn a lot of attention to how this new class of financial asset will be regulated in the United States,” she began, adding:
A grossly imprecise oversimplification has often been offered, suggesting that they are either securities regulated by the Securities and Exchange Commission or commodities regulated by the Commodity Futures Trading Commission.
“The CFTC does not regulate commodities (whether they are securities or not); Rather, it regulates derivatives – and that applies to digital assets as well as to any other asset class, ”stressed Commissioner Stump.
“The CFTC has no regulator for cash commodities,” she said, making it clear that the derivatives watchdog “regulates futures contracts on commodities and other derivative products such as swaps.” These include “futures contracts on Bitcoin and Ether that are listed for trading on various CFTC-regulated exchanges”.
The commissioner noted that digital assets, which are securities, fall under the jurisdiction of the SEC, but “futures and other derivatives on securities may be regulated by the CFTC or the SEC or both together”.
In order to determine who has jurisdiction in a particular case, Commissioner Stump said that “an analysis of the legal framework of Congress,” CFTC rules, SEC rules and “the specifics of the product” is needed and stated:
Therefore, if a digital asset is a security, further analysis is needed to determine where the regulator rests on a derivative product on that digital asset.
Whether a particular crypto asset is a security, SEC chairman Gary Gensler said the rules are clear. “Certain rules regarding crypto assets are well regulated. The test to determine whether a crypto-asset is a security is clear, “he said earlier this month.
However, some people, like Brad Garlinghouse, CEO of Ripple, disagree. He is being sued by the SEC over the sale of XRP.
Commissioner Stump also noted that the CFTC has an “enforcement authority” which “includes a broader application for the anti-tampering and anti-fraud authority”. This authority extends to cash that the CFTC does not regulate in order to “protect the integrity of the derivatives markets” as a whole. An example of this enforcement agency is the action taken by the CFTC against Bitmex.
The Commissioner concluded:
For several years now, the CFTC has been aggressively using its broader enforcement powers to prevent tampering and fraud related to digital cash holdings, even though the CFTC does not regulate them.
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