The chair of the Commodity Futures Trading Commission, Rostin Behnam, highlighted the risks stemming from the recent debut of Bitcoin spot ETFs. Behnam’s caution comes two weeks after the Securities and Exchange Commission finally green-lit the first batch of this group of investment products that have since recorded combined inflows of more than $5.5 billion, having sparked a feverish — albeit short-lived — excitement as BTC price galloped past $48,000 for the first time since April 2022.
CFTC Chair Behnam said he fears that market participants may mistake the technical approval of an investment product such as Bitcoin ETF with an actual regulatory oversight over the digital assets commodities market. According to Behnam, there are currently no firm regulations in place for Bitcoin and the cryptocurrency market in general, which is, in his words, rife with “opaque and inconsistent practices.”
A major victory for the cryptocurrency industry, the Bitcoin ETF had a convoluted journey to the US market. The first application for such a product was filed in 2013 by Cameron and Tyler Winklevoss, co-founders of crypto exchange Gemini. Over the next decade, theirs and all subsequent applications were rejected by the SEC on the grounds of the market not being mature enough, and therefore being prone to manipulation.
Now that the Bitcoin ETFs have finally launched, it is much easier for retail and institutional investors to bet on the biggest cryptocurrency, as they can now buy shares in a Bitcoin ETF off the SEC-supervised stock exchange without the need to directly hold the asset. Behnam, however, emphasized that not a single federal regulator has been granted authority by Congress over the cash markets for digital assets, such as cryptocurrency exchanges. And since fund management companies acquire the underlying asset from the cash market, this directly impacts the transparency of Bitcoin ETFs.
"The concerns I have publicly voiced for the better part of six years regarding the digital asset commodity spot market have only become magnified," Behnam said. "The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action."
The two US financial watchdogs, the SEC and CFTC, have long been embroiled in a regulatory tug-of-war over which agency is best suited for the high-profile task of overseeing the crypto industry. In a 2022 testimony before a Senate Agriculture Committee, CFTC Chair Behnam stated that many digital assets, including Ethereum and stablecoins, should be under his agency’s supervision as commodities. This seems to be in direct contradiction with the SEC’s approach. SEC Chair Gary Gensler has claimed on several occasions that virtually all crypto assets besides Bitcoin are securities, and thus fall under the SEC’s jurisdiction.
Although both agencies generally agree that the cryptocurrency sector needs transparent regulations in place to minimize risks to investors and the wider economy, the exact division of agencies’ roles is still unclear, which complicates the crypto regulatory environment.
