In a keynote address at the FIA Expo on Wednesday, CFTC Commissioner Dawn Stump urged the industry, and regulators, to go back to the basics in their discussions of who should oversee digital assets and how they should be overseen before “engaging in a jurisdictional power-grab.”
She said she is often asked to address the topic of cryptocurrencies at conferences.
“I am reminded that the public is confused by the application of each federal and state regulator’s current regulatory and enforcement regime,” she told the Expo audience. “Until we remedy that confusion, we cannot have an honest conversation about whether any agency needs new authorities. And only then can informed stakeholders contribute to designing a workable regulatory structure.”
She said this confusion appears evident when “well-intentioned product developers” try to determine if they need to communicate with the CFTC or the Securities and Exchange Commission in achieving proper U.S. regulatory compliance for crypto products. When doing so, “they ask the wrong question: ‘Is my product a security or is it a commodity?’” she said.
“Any pronouncement that an asset is a commodity should not be interpreted as a roadmap to the CFTC for regulatory oversight,” Stump said. “I want to be very clear that the CFTC regulates derivatives – we are specifically charged by Congress to regulate futures and swaps – many of which have commodities as their underlying assets, but we do not regulate the underlying commodities themselves.”
While acknowledging that the current regulatory structure is complicated, she added: “My opinion is that we should stick to what we do best in regulating the infrastructure that supports futures and swaps markets. Whether based upon corn, crypto, or credit defaults, the derivatives markets we regulate function very differently from those markets that facilitate exchange of the underlying assets.”
The second most in-demand subject of discussion is climate and carbon markets, Stump said. Those, too, are mired in complications. “Like many things we as a nation grapple with, this one is multi-faceted to the point that sometimes the basics get lost in the mix, “ she said. “If we are to have an honest conversation about a path forward, we must consider the entire picture, which is well beyond just the environmental goals, but also involves strong impact investor sentiments as well as everyday consumer needs.”
Calling carbon emission reduction “a balancing act,” Stump said that “while institutions finance new technologies to advance carbon emission reduction, those that continue to support existing infrastructure in the meantime should not be penalized.”