WASHINGTON, July 26, 2022 – In light of dwindling crypto stock prices and reports of the increasing risk of fraud associated with the digital currencies, the chairman of the Commodity Futures Trading Commission said at a Brookings Institution event Monday that there needs to be more regulation.
Rostin Behnam said amid the crypto market chaos, regulation is needed to protect Americans. Since the beginning of 2021, “More than 46,000 people reported losing over a billion dollars in crypto to scams” and that the median loss per individual was $2600 from crypto, Behnam said.
“Our guiding principle at the CFTC must be to stop fraud or harmful conduct that harms our markets,” Behnam said, explaining the need to use CFTC authority to bring justice to those who harm our markets. However, without current regulation, Behnam added that “existing ambiguities force hard decisions at the CFTC.”
Behnam praised recently introduced legislation – the Responsible Financial Innovation Act –which proposes a regulatory framework for cryptocurrency under the CFTC’s authority. “I’m encouraged by the bipartisan, bicameral support for legislation that recognizes the need for guardrails around the digital asset economy,” he said.
Behnam has previously pitched his commission as the preferred regulator. In February, he said there needs to be a single regulator to “fully police conflicts of interest and deceptive trading practices impacting retail customers.
“The CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market,” he said then.
Until then, Behnam said the CFTC is monitoring how it can get mitigate some harms in lieu of legislation. We “need to constantly monitor risky behavior,” he said, adding the commission is thinking “creatively about how [to] use existing regulatory authority to root out fraud and manipulation in the market.”
There has been debate about what type of regulation should be imposed on the digital currencies and who should be administering that. Some have suggested that there should be a singular regulatory body, as there is confusion as to whether the currencies are commodities or securities, which would but them under the purview of the Securities and Exchange Commission.
In June, the Department of Justice announced four cases of criminal offenses of cryptocurrency fraud, one of which was the largest non-fungible token scheme ever brought. All cases involved over $100 million in losses.
“As cryptocurrency marketplaces advance and offer new opportunities for consumers, criminals also seek ways to exploit them,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division.
“We have moved past the stage where digital assets were once a research project,” Behnam said. “There is a critical need to educate and protect the public.”
