Concerns over Market Misunderstanding
Gary Behnam, a prominent figure in the financial industry, expressed his apprehension regarding the regulatory approval of Bitcoin Exchange-Traded Products (ETPs). In his address at an American Bar Association event, Behnam emphasized the potential risks associated with mistaking technical approval for genuine regulatory oversight in the realm of cash commodity digital assets.
Behnam highlighted the absence of Congressional authority over the cash markets for digital assets, leaving federal regulators without the necessary power to ensure effective supervision. Although lawmakers have worked on crafting bills that would grant the Commodity Futures Trading Commission (CFTC) more authority over the cash market, these endeavors have yet to secure the required support. Some skeptics even refer to the proposed bill as a biased “wish-list of big crypto.”
Critical Need for Federal Legislation
Underscoring the importance of regulatory action, Behnam expressed that his previously voiced concerns about the digital asset commodity spot market have grown even more pronounced over the past six years. The absence of specific legislation addressing opaque and inconsistent practices related to the cash markets for digital assets, such as conflicts of interest and customer protections, remains a pressing issue.
ETPs and Regulatory Indirection
Behnam criticized the notion of wrapping speculative and volatile assets, like Bitcoin, in a thin layer of indirect regulation by introducing ETPs. He opined that this practice merely packages such assets as shiny new investment products, ultimately obscuring the need for comprehensive regulatory oversight.
Enforcement Actions against Bad Actors
Behnam commended his agency’s proactive stance in tackling fraudulent activities within the crypto space. In 2023, the CFTC successfully initiated 47 digital asset-related enforcement actions out of a total of 96 cases. Notable endeavors included the actions against individuals and entities such as former FTX CEO Sam Bankman-Fried, crypto exchange Binance, its CEO Changpeng Zhao, and Celsius and its former CEO Alex Mashinsky.
Behnam clarified that the agency’s ability to combat digital asset fraud and manipulation relies on regulated market surveillance, oversight, and tips or complaints received. These vital sources enable the CFTC to take action when uncovering irregularities or anomalies in the market.