Cryptocurrency developers and US lawmakers are on track to put the Commodity Futures Trading Commission in charge of regulating digital currencies, said CFTC Commissioner Summer Mersinger.
The designation would expand the CFTC’s mandate to oversee agricultural, energy and financial options markets and pave the way for the agency to regulate other digital assets such as non-replaceable tokens or NFTs.
Separately, the CFTC is considering how carbon trading markets work, with a view to their use in hedging and risk management.
Mersinger, one of five commissioners on the independent board that oversees commodity and financial futures markets, spoke on the sidelines of the Reuters Commodities Trading USA conference in Houston on Tuesday.
Major crypto firms have backed the CFTC, and on Tuesday U.S. Senators Cynthia Lummis, Republican from Wyoming, and Kirsten Gillibrand, Democrat of New York, introduced a bill that would make CFTC the chief overseer of the industry.
“You see the industry merging around the CFTC and becoming the primary regulator,” Mersinger said.
Lawmakers haven’t decided which agency would oversee cryptocurrencies, but the proposed Lummis-Gillibrand bill provides a starting point for the congressional debate.
The CFTC has begun its own assessment of a potential role vis-à-vis cryptocurrencies, with staff looking for opportunities in areas such as spot crypto trading “where we could play a bigger role,” Mersinger said. She cautioned that the agency has not regulated spot markets in the past and the assessments are preliminary.
“We are still a strong regulator, but our registrants have a lot of flexibility,” she said. “They were very interested in that approach versus the top-down approach of some of the other financial regulators,” she said.
Carbon trading is another area the CFTC has an interest in. Its regulation is now largely overseen by industry groups and voluntary by the participants.
“We’re interested in that space, but we’re not arranging that space,” said Mersinger. One consideration is what changes might be needed for the voluntary markets to work properly, she added.
In 2020, when US oil futures prices first turned negative amid fears of a lack of physical storage amid collapsing demand, CFTC issued an advisory warning of the risks not enough people were taking seriously, she said.
One lesson it learned was that there was a need for broader agency collaboration and discussion of contract settlement terms with the exchanges and traders, she said.
“In the end, storage wasn’t as much of a problem” as feared, but it wasn’t communicated well, she said.
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