Gary Gensler is leaving office soon. What is Trumps intention in expanding the CFTCs regulatory authority?

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Trump will be officially inaugurated on January 20, 2025. After winning the election this month, a series of personnel changes are also underway. According to the new cabinet members announced, many are coin holders, including Vice President JD Vance, Treasury Secretary Scott Bessant, Commerce Secretary Howard Lutnick, etc., and the regulatory powers of the SEC and CFTC, which have direct regulatory ties with the کرپٹو field, may also usher in changes.

On November 27, Fox reported that the incoming Trump administration wants to expand the powers of the Commodity Futures Trading Commission (CFTC) to give it regulatory authority over a large portion of the $3 trillion digital asset market.

The current U.S. SEC Chairman Gary Gensler is about to leave office. Why does Trump plan to expand the CFTCs regulatory authority over the crypto market at this time?

The CFTC is authorized by the U.S. Congress to regulate the $20 trillion U.S. derivatives market, including futures, options, and physical commodities such as gold, oil, and wheat. Like the SEC, the CFTC has the power to set market rules and take enforcement actions, but because the derivatives market is mainly dominated by sophisticated institutional investors rather than retail investors, it is generally considered to be more relaxed in regulation than the SEC and better at managing risks.

The SEC, also an important regulatory department, is mainly responsible for regulating the securities market, including stocks, bonds, mutual funds and government bonds. Its main goal is to protect the interests of investors, especially retail investors.

In the past, the US SEC considered most cryptocurrencies as securities and included them in its jurisdiction, and its supervision of the crypto market was quite strict. The SEC recently announced that its enforcement efforts in fiscal year 2024 hit a record high, with a total of 583 enforcement actions filed and $8.2 billion in financial remedies received. This year alone, the cryptocurrency field has been involved in lawsuits with multiple institutions such as Kraken, Ripple, Cumberland, Crypto.com, Opensea, and Consensys.

In contrast, the CFTC tends to have a more open and friendly attitude towards emerging markets and new technologies. For example, the CFTC approved Bitcoin futures trading in 2017. However, the CFTC and the SEC have a dispute over regulatory power over whether many tokens in the crypto market are commodities or securities.

CFTC Chairman Behnam once said, BTC and ETH have been confirmed by the court as digital commodities, and 70%-80% of the crypto market is non-securities. In this case, there is no doubt that some regulatory power should belong to the CFTC and it should be primarily responsible for supervision. However, SEC Chairman Gary Gensler has made it clear on many occasions that securities laws apply to most crypto assets and the SEC has the right to regulate the crypto market.

Judging from the current prosecution cases, the US SEC still plays a leading role.

Currently, neither department has formulated clear and specific rules for the encryption field. Instead, they prefer to use law enforcement actions to regulate the encryption market. For example, CFTC Chairman Behnam said that about 50% of the agencys enforcement actions this year are against cryptocurrency companies.

Although this has to some extent combated a number of frauds and violations, it has also been criticized and condemned by various organizations and many practitioners in the crypto industry.

At present, the Trump administration hopes to provide a clearer and more stable regulatory framework for the cryptocurrency market by expanding the CFTCs authority.

The CFTC may be responsible for regulating digital assets and their spot markets that are considered commodities, including Bitcoin and Ethereum, while the SEC will continue to regulate crypto assets that are considered securities. This division will help reduce market uncertainty, improve regulatory efficiency, and reduce regulatory overlap and conflicts between the SEC and the CFTC. As a highly anticipated crypto-friendly president, Trumps final decision after taking office is unknown, but the regulatory policies and frameworks of the crypto industry may be clearer under his promotion, thereby promoting market development.

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