Bitcoin regulation by the CFTC and SEC is unavoidable. While some are opposed, regulatory certainty will increase bitcoin use and price.
The ongoing debate on the need for a comprehensive U.S. regulatory framework to identify potential and hazards in the quickly rising Bitcoin sector has piqued the public’s interest.
The Commodity Futures Trading Commission (CFTC) head, Rostin Behnam, has stated that adequate regulation of the cryptocurrency field might have major beneficial implications on market growth, notably for bitcoin.
“Growth may occur if we have a well-regulated area,” Behnam remarked at New York University School of Law.
Behnam also stated, “Bitcoin’s price may double if there is a CFTC-regulated market,” which made news throughout the world. His remarks are unsurprising considering that he has previously underlined the importance of regulatory certainty in the Bitcoin industry.
The CFTC and SEC must collaborate
Representatives from the Senate Agriculture Committee, which oversees the CFTC, introduced a new measure earlier this year that would make the CFTC the lead regulator of the digital assets industry and increase its authority over bitcoin spot markets.
Trading firms would also be required to register with the CFTC under the plan. Behnam expressed his support for the bipartisan plan, which would also empower the CFTC to levy regulating entities fees in order to strengthen its financial authority.
“We are [currently] appropriated money by Congress, and it has put us in a position where we feel like we’re constantly on edge about how much money we will be appropriated,” Behnam added during the NYU School of Law event. “We are still feeling the wounds and scars from about five or six years of flat funding.”
Behnam said that because the CFTC lacks jurisdiction, it lacks standard surveillance services and market monitoring tools to effectively regulate trading platforms and other intermediaries.
These statements came nearly a month after former CFTC Chairman Timothy Massad asked on the CFTC and the US Securities and Exchange Commission (SEC) to collaborate to address the present crypto regulatory gaps by forming a self-regulated entity (SRO).
Massad said that neither the CFTC nor the SEC has the authority to regulate bitcoin and other digital assets. There is now a major gap in regulating what he refers to as “the cash market for crypto assets.” This covers bitcoin trading on exchanges such as Coinbase or Kraken. While the United States Congress has proposed many laws to solve this issue, Massad feels that an SRO is the best option.
SEC Chair Gary Gensler stated earlier this month that he favors the concept of giving the CFTC the job of chief non-securities cryptocurrency regulator, but that Congress should not disregard the SEC if that happens. He emphasized the need of ensuring that securities rules governing the $100 trillion capital markets are not compromised, as these regulations have made capital markets the envy of the world.
Who will success from regulation?
Many in the industry believe that a well-established regulatory framework might attract more institutional investors and accelerate bitcoin market adoption. Behnam also stated that digital asset providers saw great potential for “institutional inflows, which can only materialize if these markets have a regulatory structure.”
Bitcoin initiatives, according to Behnam, “thrive on regulatory stability,” and the group expects to have greater clarity in the near future, allowing these firms to continue creating creative solutions that transform people’s lives. Again, this is not surprising given Behnam’s continuous advocacy for the need to offer regulatory certainty to market players, which many in the business believe is lacking.
Finally, bringing bitcoin under CFTC supervision might put an end to the entire securities debate. This enhanced transparency and visibility might open the road for additional institutional players to boost their exposure to bitcoin, as they insist on a clear regulatory framework governing digital assets.
While many people are pushing for more regulatory clarity, other experts fear that a thorough regulatory framework might harm some of the country’s largest companies, like Coinbase. Wells Fargo analysts launched research coverage on Coinbase with an underweight rating, citing the potential of a more restrictive government posture against digital assets as one among many considerations.
Analysts said in the introduction note that a harsher regulatory environment, as well as persistent macro challenges, might have a meaningful impact on Coinbase’s volumes and revenue in 2023.
“Regulation, in particular, will be an issue for COIN, as seen by the SEC’s recent talk of ‘cryptos as securities’ (e.g., for staked assets),” Wells Fargo analysts wrote.
Conclusion
For years, the CFTC and the SEC have fought for control of the bitcoin business. Both have been hesitant to give much formal guidance for Bitcoin enterprises, preferring to build regulatory precedence through enforcement proceedings.
While some industry professionals are opposed to the development of a full regulatory framework for Bitcoin, many continue to emphasize the significance of greater clarity in this area. While many Bitcoin locals remain opposed to any regulation, the extra clarity may hasten the asset’s development.
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