During a recent Senate Agriculture Committee hearing, the Chairman of the U.S. Commodity Futures Trading Commission, Rostin Behnam, expressed his view that Ether and stablecoins should be classified as commodities, rather than securities. This diverges from the stance taken by Securities and Exchange Commission Chair Gary Gensler, who has argued that most cryptocurrencies, excluding Bitcoin, should be classified as securities and therefore fall under SEC oversight.
The issue of how cryptocurrencies should be classified has become a central topic of debate, as it would determine which agency has regulatory authority. Gensler has previously argued that Ether, the native token of Ethereum, could be classified as a security if it moves to a proof-of-stake consensus model, while Behnam believes it should be considered a commodity.
During the Senate Agricultural hearing on March 8th, Senator Kirsten Gillibrand inquired about the divergent perspectives between the CFTC chair Rostin Behnam and the Securities and Exchange Commission regarding the CFTC's settlement with Tether, a stablecoin issuer.
Behnam stated:
“Not withstanding a regulatory framework around stablecoins, they’re going to be commodities in my view,” Behnam said. “It was clear to our enforcement team and the commission that Tether, a stablecoin, was a commodity.”
When questioned about the CFTC's stance on Ether's regulatory classification during the Senate hearing, Behnam emphasised that the CFTC would not have authorised Ether futures products to be listed on its exchanges if it did not firmly believe that Ether was a commodity asset adding.
“We have litigation risk, we have agency credibility risk if we do something like that without serious legal defenses to support our argument that the asset is a commodity.”
The CFTC has previously included the stablecoin Tether as a commodity in a complaint against FTX founder Sam Bankman-Fried, and Behnam reiterated this view during the Senate Agriculture hearing. However, there remains a lack of consensus between the CFTC and the SEC on how to classify stablecoins, which could cause issues for key banking regulators such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
Despite the differences in opinion between the two agencies, Behnam has stated that he is working closely with the SEC on opportunities for coordination. While legal guidance has not been provided on how commodities and securities should be differentiated, there are positive signs that the agencies are seeking to collaborate on this issue.
Senator Kirsten Gillibrand along with her co-sponsor Senator Cynthia Lummis, plan to release a more detailed version of the Responsible Financial Innovation Act in mid-April. Gillibrand cited the "competition for oversight" with the SEC over differing views over Ether during the hearing. However, the CFTC Chairman Rostin Behnam had positive feedback for the bill, which covers stablecoins, custody, and cybersecurity risks, describing it as comprehensive.
While the debate around the classification of cryptocurrencies may persist, the engagement of regulators in constructive dialogue and collaboration is a promising development for the industry. The proposed comprehensive bill by the senator offers hope for a clear framework that could aid in the regulation of cryptocurrencies. It's crucial to note that regulatory clarity and oversight are fundamental in creating a secure and reliable space for investors to venture into the cryptocurrency market. As stablecoins continue to gain recognition and acceptance, a transparent regulatory framework will undoubtedly facilitate their mainstream adoption.
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