A commissioner for the CFTC believes that regulators should provide more clarity on cryptocurrency compliance before penalizing alleged infringements.
Dawn Stump, the lone Republican on the five-member Commodity Futures Trading Commission (CFTC), has become an increasingly vocal opponent of “regulating through enforcement,” which she says has been happening with greater frequency recently. “What I discourage here at the CFTC is bringing enforcement actions without giving [their targets] the tools they need to be compliant,” Stump said in an interview.
“Missed the mark”
Stump highlighted several cases in which she believed enforcement occurred before the rules had clearly been laid out. For instance, when the CFTC fined crypto exchange Kraken $1.25 million for failing to register as a futures broker. According to Stump, current regulations offer no explanation for how these entities should register.
The commissioner also referred to a recent incident with Tether. Despite finding no issue with the claim of the digital tokens being fully backed by dollars, the CFTC forced the world’s largest stablecoin issuer to pay a $41 million penalty after initially finding that assertion dubious.
In such cases, Stump said the CFTC “missed the mark” by not making it clear that daily oversight of cash markets does not fall under its remit. “We’ve given the public a false sense of security when we bring these cases without including that clarification,” she said. Stump doesn’t believe that digital commodity products necessarily fall under CFTC jurisdiction either, stressing the regulator’s responsibility over derivatives. “We don’t regulate cattle,” she said. “We regulate cattle futures.”
Eye on the ball
Although cryptocurrencies deserve proper regulation, Stump warned that this might not be a role best performed by the CFTC. She said it could deprive the regulator of precious resources for lengthier, complex cases that relate to products more traditionally covered by the CFTC.
“I just want to make sure we don’t inadvertently reallocate our resources in a way that the other things we focused on previously take a back seat,” Stump said. “If you have too many priorities… that also distracts from what we’re very good at, and what we’re good at is regulating derivatives products.”
While implying that the Securities and Exchange Commission (SEC) may be better qualified to properly regulate cryptocurrencies, Stump clearly takes issue with its current approach. “I do wish the SEC would [give] more specifics on how they arrive at the conclusion that some of these things [digital coins] are securities,” Stump said.
Although many thought newly appointed SEC Chair Gary Gensler would help facilitate cryptocurrencies, he has taken a more measured approach. Although he has said that many crypto products could be defined as securities, he has given no further guidance beyond this, believing existing rules to be sufficiently clear.
However, a Republican member of the SEC has also spoken out against taking this stance. Earlier this year, SEC Commissioner Peirce said she believes the agency isn’t doing enough to work with cryptocurrency firms in establishing regulations that they can comply with.
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