CFTC chair calls for new legislation citing spot BTC ETF related risks

• CFTC chair Rostin Behnam has concerns about the recent approval of spot BTC ETFs in the US.
•  He cites risks sprouting from mistaking spot ETF approvals with actual regulatory oversight of the cash commodity digital assets.
• Behnam wants new federal legislation over cash market digital assets.

Barely three weeks after the US Securities and Exchange Commission (SEC) approved all the spot Bitcoin (BTC) exchange-traded funds (ETFs), the agency’s enforcement counterpart, Commodities Futures Trading Commission (CFTC), has raised issues, citing inadvertent risks and is now calling for new federal legislation.

Also Read: Despite Spot BTC ETF approvals, the SEC does not endorse Bitcoin

Speaking at an American Bar Association event, CFTC chair Rostin Behnam raised concerns over the recently approved spot BTC ETF, saying:

I fear that the regulatory approval of bitcoin ETPs introduces risk that, in spite of yellow flags, market participants, retail and institutional alike, may mistake the technical approval of a product—with actual regulatory oversight of the cash commodity digital assets.

According to Behnam, there being no federal regulator with the authority to oversee cash markets for digital assets is a risk in itself, urging Congress to do so with haste. This has been the subject of his campaign for the better part of the last six years, calling the regulation of the digital asset commodity spot market as a precaution against issues relating to conflicts of interest and customer protections.

[There is nothing firmly in place to] address the opaque and inconsistent practices in the cash markets for digital assets.

Despite his boldness on the matter since the last half a dozen years, Behnam feels the landmark decision on January 10 has “magnified” his fears, adding, “The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action.”

The CFTC chair calls out the US SEC for a decision that saw ETPs take a speculative and volatile asset, wrap it in a thin layer of indirect regulation, and package it as a shiny new product. 

It should be noted, however, that despite Spot BTC ETF approvals, the SEC articulated that the agency does not endorse Bitcoin. In a statement post-approvals, SEC Chair Gary Gensler said:

While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto. 

It comes after Gensler cautioned market participants about the risks of crypto investing, listing possible incompliance, market risk, and fraud, as part of the dangers. 

Nevertheless, the CFTC chair reiterated the commission’s commitment to go after bad actors in the crypto arena, highlighting that in 2023, the CFTC became the “premier enforcement agency in the space.”

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