Trump Administration Eyes CFTC for Crypto Oversight, Potentially Sidelining SEC

The incoming Trump administration reportedly favors the Commodity Futures Trading Commission (CFTC) over the Securities and Exchange Commission (SEC) to regulate Bitcoin and Ether, potentially reshaping the future of crypto oversight in the U.S.

This potential shift, reported by Fox Business, signaled a departure from the SEC’s often-aggressive approach to crypto regulation under outgoing Chair Gary Gensler. It suggested a move towards a more tailored regulatory framework, with the CFTC taking the lead on digital assets deemed commodities, like Bitcoin and Ether.

Previously, the SEC asserted broad jurisdiction over the crypto space, often classifying tokens as securities based on the Howey test. This led to numerous enforcement actions and uncertainty within the industry.

However, even Gensler has publicly acknowledged Bitcoin as a commodity. Furthermore, the CFTC itself classified Ether as a commodity in a legal action against Kucoin earlier this year, lending credence to the potential regulatory shift.

President-elect Trump’s vocal support for the crypto industry further reinforces this narrative. During his campaign, he promised initiatives like a federal Bitcoin reserve and the appointment of a White House crypto advisor. His criticism of Gensler’s regulatory approach, coupled with Gensler’s announced resignation effective on Trump’s inauguration day, fueled speculation of a deliberate move towards a new regulatory paradigm.

Industry watchers reacted to the news with a mix of optimism and caution. “Makes sense if there’s a clear line between digital asset security and commodity,” commented Jeremy Hogan, a crypto legal expert.

“The CFTC only regulates fraud, etc in the spot markets and that is really what the crypto space is calling for.” Hogan added, “It would be an easy piece of legislation to draft, I could do it in an hour, but…when/how is that going to happen?”

Caitlyn Long, founder of Custodia Bank, offered a more critical view, suggesting the issues may extend beyond policy decisions to agency culture. “This is smart,” Long said, referencing the potential shift towards CFTC oversight.

“The worst offenders weren’t just the political appointees at the SEC—the worst offenders included many of the career agency staff too. Same at the Fed, FDIC & OCC. I know where the proverbial bodies are buried!!!”

Matt Hamilton, a senior developer advocate at Arbitrum, expressed a more reserved view. “Well, it could be a lot worse. But I don’t see anything that would suggest it would be better. At the moment the biggest issue is there isn’t any clarity on which regulator has jurisdiction over what in crypto.”

While a shift toward CFTC oversight for Bitcoin and Ether could provide some clarity, significant questions remain. The precise definition of a digital asset security versus a commodity remains unclear. The scope of the CFTC’s authority over the broader crypto market, including decentralized finance (DeFi) protocols and stablecoins, also needs to be defined.

Furthermore, legislative action would likely be required to formalize any shift in regulatory responsibilities. The timeline for such legislation, and the potential for political gridlock, adds another layer of uncertainty to the evolving regulatory landscape.

Yona has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Daily is an official media and publication of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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