An inter-agency jurisdictional war is breaking out between the Commodity Futures Trading Commission and the Securities and Exchange Commission – with both agencies fighting to expand their regulatory remit over the rapidly emerging crypto and DeFi industry.
In a powerful statement released on Twitter, Commodity Futures Trading Commission (CFTC) Commissioner Brian Quintenz stated – in no uncertain terms – that crypto was the jurisdiction of his agency.
Just so we’re all clear here, the SEC has no authority over pure commodities or their trading venues, whether those commodities are wheat, gold, oil….or #crypto assets.
— Brian Quintenz (@CFTCquintenz) August 4, 2021
His words appear to have some serious legal kudos. In October 2018 a District Court in Massachusetts ruled that digital assets – including cryptocurrencies – were a commodities offering, and that the CFTC was the regulatory body with jurisdiction over crypto-related fraud.
The Securities and Exchange Commission (SEC) could, therefore, be seen to engage in inter-agency competition and regulatory creep (engaging in activities outside of their remit).
Democratic Representative Don Beyer introduced the Digital Asset Market Structure and Investor Protection Act last week, which aimed to make ‘digital asset securities’ the jurisdiction of the SEC, while retaining CFTC authority over ‘digital assets’.
Key to this battle over jurisdiction is the controversial legal case between the SEC and Ripple (XRP).
This case rests on whether or not XRP can be considered a securities asset – a classification Ripple is seemingly successfully fending off after Judge Netburn gave the green light to the deposition of former SEC Chairman William Hinman who publicly described Ethereum as a non-securities asset.
For many fearing the US crypto regulation agenda this is reassuring news, as while the CFTC and SEC have been working closely on investor alerts relating to Bitcoin (BTC) futures and fraudulent crypto websites, it seems the regulators may quickly become distracted by a punch-up about inter-agency overlap for the time-being.
Reinforcements on the sidelines
Many on Twitter have been rushing to support the statement by Commissioner Brian Quintenz, perhaps most prominently the former chairman of the CFTC, Chris Giancarlo, who highlighted that the Biden administration’s slow-moving appointment of a new CFTC chairman has allowed the SEC to steal ground on crypto regulations.
Only one US regulatory agency has experience regulating markets for #Bitcoin & #Crypto and it is not @SECGov. It is @CFTC. If #BidenAdministration is serious about sensible #Cryptocurrency #regulation, it needs to nominate a CFTC #chairman.
— Chris Giancarlo (@giancarloMKTS) August 4, 2021
Another powerful group advocating the CFTC is the GOP House Agriculture Committee – the host of the Republican sub-committee responsible for energy and commodities trading. Comprised of 24 influential Republican lawmakers, it appears the CFTC has significant congressional support.
.@CFTCquintenz is right, #crypto is bigger than the SEC.
Congress needs to write the rules of the road to protect investors AND innovation in the digital economy. https://t.co/vIzND3KY28
— House Committee on Agriculture (@HouseAgGOP) August 4, 2021
However, there are those such as Senator Elizabeth Warren who want to see a securities classification and harsh crypto regulation.
The stage is set for a showdown.
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