Commodity trading in the United States began in 1848 with contracts for corn, wheat, and soybeans, and these commodities still account for the bulk of business at the Chicago Board of Trade. But now, digital currency is coming on the scene leaving questions about how it will impact trade.
The Senate Agriculture Committee called the Commodity Futures Trading Commission to the witness stand to gain a better understanding of how Congress should regulate digital assets, like bitcoin and cryptocurrency. Chairman Rostin Behnam explained their current authority was limited to fraud and manipulation.
“We need authorization and a regulatory structure over cash, digital assets, that will not be structurally much different than the current markets that we oversee. There will obviously like I said earlier, be novel issues and questions we have to ask around custody and settlement given the digital nature of these assets.”
Some of those questions revolve around how to regulate the different types of digital assets.
“There are certainly a large number of coins that are commodities, including two the biggest which are Bitcoin and Ether. But given the vast number, there’s no doubt in my mind, there are also security coins. And this is a big, big issue and one that I think we collectively should work on as we think about the regulatory environment, if at all, is to draw very clear, distinct rules of the road of what might constitute a commodity versus what might constitute a security.”
Digital assets currently have some market regulation at the state level, but Behnam says it is insufficient at the federal level.
“If we can embed pre-trade print transparency, post trade transparency, which is reporting having this concentrated order book where we can see bids and offers and then having rules of the road for execution or custody, for clearing and for settlement, these are the main foundations and pillars of a well-functioning transparent market.”
Senator Boozman expressed caution about the CFTC expanding their jurisdiction into traditional agricultural commodity spot markets, which he said would not be welcomed by agricultural stakeholders.
“Senator, I unequivocally agree with you. I don’t mean to suggest that all that this should be the start of the CFTC role in a larger pool of cash commodity markets. As I said in my statement, many cash commodities including in the agricultural space in the energy space, have existing federal regulatory oversight to some extent, this particular market is so unique because of the retail facing element of it. And the fact that there is no oversight currently.”
When asked what additional resources the CFTC would need to be able to expand oversight of digital assets, the chairman suggested an additional $100 million dollars to their current $300 million budget.
The White House is currently working on a digital asset executive order and Chairman Behnam says his team has been part of the process.
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