The lack of a clear legal framework for digital assets has led to several cryptocurrency firms—particularly those based in the United States—being slammed with lawsuits from U.S market regulators. According to the Commodities Futures Trading Commission (CFTC) Chairman Rostin Behnam, the crackdown on crypto firms will probably increase within the next two years, admitting that adequate regulation is needed to protect retail investors from bad actors.
In an interview session at the 27th Annual Global Conference, anchored by Michael Piwowar, the Executive Vice President at MI Finance, Milken Institute, Behman discussed the role of the CFTC in digital assets regulation, progress with stablecoin legislation and what the coming years will be like for crypto firms.
First, the CFTC Chairman noted that the Commission’s responsibility is very limited to enforcement around fraud and manipulation of digital asset commodities. “It does not include traditional regulatory tools; registration, surveillance, oversight and supervision,” he said.
Second, Behnam reported that momentum has been building around stablecoin legislation in the U.S Congress lately, with a focus on guaranteeing transparency on the part of stablecoin issuers. The development comes against the backdrop of transparency concerns with several stablecoin issuers, including Tether in recent years. However, the CFTC Chairman noted that the percentage of achieving stablecoin legislation in 2024 is “fairly low,” citing limited working days (legislative days at Congress) due to the upcoming Presidential election and other scheduled recesses.
Read also: Tether (USDT) Stablecoin: Use Cases and Pros and Cons You Should Know
Crypto firms crackdown expected to continue till 2026
Responding to Piwowar’s questions regarding the broader crypto market structure bill in the U.S, Behnam said he expects the prevailing crackdown on cryptocurrency firms to continue for the next two years. He urged market participants to view things from a regulatory and consumer protection standpoint.
Citing that investor interest in crypto assets has increased significantly despite the series of bad events that occurred in the industry in 2022, the CFTC chair said the predicted enforcement actions on crypto firms will stem from the desire to protect investors from bad actors or potential market fraud and manipulation.
Recall that the FTX exchange founded by Sam-Bankman Fried and Do Kwon’s Terra ecosystem both collapsed in 2022, leading to billions of dollars being swept out of the crypto market. These unfortunate occurrences bankrupted several crypto projects, resulting in grave losses for many investors.
Read also: FTX Collapse: Does FTX Token (FTT) have a future?
Read also: TerraUSD Contagion: How Prime Trust failed after investment in Terra algorithmic stablecoin
“We’re going to probably see in the next 6 to 18 months, or 6 to 24 months, another cycle of enforcement actions because of this cycle of asset appreciation and interest by retail investors,” he said. “And without a regulatory framework, without that transparency, without those tools that we typically use, as regulators, you’re going to continue to see this fraud and manipulation,” Behnam added.
Overall, Piwowar admitted that bringing crypto firms into a regulatory framework would be the right action to take as the nascent industry could play a positive role in shaping the nation’s economy and commerce. While he did not mention the agency that will be behind the predicted enforcement actions geared towards protecting investors, it bears mentioning that both the U.S Securities and Exchange Commission (U.S SEC) and CFTC have pending lawsuits against crypto firms.
A January report by Cornerstone Research showed that the number of crypto-related enforcement cases initiated by the SEC in 2023 was the highest since 2013. Among the companies targeted by the Gary Gensler-led SEC in 2023 included Binance, Kraken, Coinbase, etc. While the agency served Uniswap Labs a Wells notice in April 2024, Robinhood received a Wells notice in May 2024, indicating that the SEC plans to sue both crypto firms.
Credit: Ndianabasi Tom A crypto journalist and content writer who has been talking about cryptocurrency and blockchain technology since 2018, Ndianabasi is a Writer at Crypto Asset Buyer (CAB).