Crypto Quill

As the incoming Trump administration sets its sights on reshaping the regulatory landscape for cryptocurrencies, a significant shift in oversight is underway. FOX Business has learned that President-elect Donald Trump’s team is planning to expand the role of the Commodity Futures Trading Commission (CFTC) to oversee a large portion of the $3 trillion digital asset market. This move comes in the wake of growing frustration within the crypto industry with the Securities and Exchange Commission (SEC) under President Biden and SEC Chairman Gary Gensler’s more stringent approach to regulating the space.

A Regulatory Shift: CFTC vs. SEC

The CFTC, which oversees the U.S. derivatives market, is often seen as the “little sister” of the SEC. However, the CFTC’s mandate covers a vast $20 trillion market, including futures, options, and commodities like oil and wheat. While the SEC has traditionally taken a more aggressive regulatory approach, especially towards digital assets, the CFTC is often viewed as having a lighter touch. The derivative markets, overseen by the CFTC, are primarily composed of institutional investors, which some argue gives the agency more leeway in managing market risks without heavy-handed intervention.

Trump’s team believes that the CFTC’s more flexible approach to regulation could foster innovation within the digital asset space, particularly as blockchain technology continues to grow. With more than 50 million Americans holding digital assets, the new administration sees an opportunity to ensure the U.S. remains at the forefront of the global cryptocurrency market.

CFTC’s New Role: Regulating Spot Markets and Exchanges

If Trump’s plan is enacted, the CFTC would gain regulatory authority over the spot markets for major digital assets like Bitcoin and Ethereum, which make up approximately 70% of the global cryptocurrency market. This would also extend to the exchanges where these digital commodities are traded. The move would provide clarity to crypto companies and investors who have long faced uncertainty due to the lack of a clear regulatory framework for spot market transactions.

Former CFTC Chairman Chris Giancarlo, known as “Crypto Dad” for his more crypto-friendly approach during his tenure, expressed confidence that the CFTC could immediately begin regulating digital commodities like Bitcoin and Ethereum from day one of Trump’s presidency. “With adequate funding and under the right leadership, the CFTC could hit the ground running,” he told FOX Business.

SEC’s Struggles and Industry’s Preference for the CFTC

The SEC, under Gensler, has taken a tough stance on cryptocurrencies, claiming that many digital assets beyond Bitcoin qualify as securities. This regulatory approach has led to an industry-wide crackdown, with the SEC focusing on enforcement actions rather than establishing clear rules for the market. Gensler’s stance has made him and the SEC increasingly unpopular in the crypto industry, which is why many within the sector are favoring the CFTC as the primary regulator.

This uncertainty surrounding the classification of digital assets, coupled with the SEC’s unwillingness to draft specific rules, has led to a situation where both the SEC and CFTC have relied on enforcement actions to regulate the space. The lack of clear guidance has left many in the crypto industry seeking more definitive regulation to ensure legal clarity and foster growth.

The Role of “Crypto Czar”

Giancarlo, who is now being considered for the role of “crypto czar” in the new administration, would potentially lead efforts to execute crypto policy and oversee an industry-led advisory council. This new position would play a pivotal role in executing the Trump administration’s crypto agenda and ensuring that the regulatory environment supports the growth and innovation of blockchain technology.

While the SEC has yet to comment on the matter, the CFTC’s potential expanded role signals a major shift in the U.S. approach to cryptocurrency regulation, which could have significant implications for the industry’s future in the country.