CFTC Chairman's Crypto Market Warning: 'We Could Be In A Position Where Another FTX-Type Event Happens'

Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam expressed concerns about the limitations of U.S. regulatory authority in preventing another major cryptocurrency market collapse similar to FTX’s downfall.

Behnam's Remarks At Financial Markets Quality Conference 2023: Speaking at Georgetown University's Financial Markets Quality Conference 2023, Behnam stated, "Nothing has changed, and we could be in a position where another FTX-type event happens."

He noted the distinct change in the crypto investing climate compared to the period before the FTX implosion, acknowledging "the market environment is much, much different today than it was a year ago."

CFTC's Limited Authority In Crypto Markets: Behnam highlighted the CFTC's restricted regulatory powers, especially in direct asset trading markets like Bitcoin BTC/USD.

The agency's intervention is confined to cases of market manipulation and fraud, unlike its broader authority in the crypto derivatives sector.

He also mentioned the U.S. Securities and Exchange Commission (SEC), led by Gary Gensler, mainly oversees securities markets, leaving some cryptocurrencies, including Bitcoin and Ethereum, outside its jurisdiction.

Also Read: Monetary Authority Of Singapore And Industry Giants Forge Ahead With Tokenization Pilots

Legislative Challenges and Crypto Market Regulation: Post-FTX FTT/USD, U.S. legislation aiming to expand the CFTC's jurisdiction over direct cash markets in crypto remained stalled.

Despite approval by House committees, the bills lacked the necessary support in the Democrat-controlled Senate. "There's obviously a lot going on in Congress these days," Behnam said.

"These bills have been caught, I think a little bit in a holding pattern."

Lobbying Efforts and Congressional Focus: Crypto lobbyists hoped for House votes on crypto-related bills, including ones establishing U.S. guidelines for stablecoin issuers, by year-end. However, Congressional attention has been diverted to budget negotiations and leadership changes, following the replacement of former Speaker Kevin McCarthy (R-Calif.) with Rep. Mike Johnson (R-La).

CFTC's Involvement in Prediction Markets: Addressing the CFTC’s legal battle with the prediction market Kalshi, Behnam discussed the challenges of overseeing political-outcome betting contracts.

He expressed reluctance for the CFTC to become involved in election monitoring, saying, "If there are allegations of fraud or manipulation in an election ... you can imagine we then become an election cop."

Read Next: Central Banks Are Exploring CBDCs, But Don't Expect A Digital Dollar Anytime Soon

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