The chair of the Commodities Futures and Trading Commission (CFTC), Rostin Behnam, believes there is a risk of retail and institutional investors misinterpreting the recent approval of spot Bitcoin exchange-traded funds (ETFs) as firm regulations in place for Bitcoin and other cryptocurrencies in general.
In a keynote speech on Jan. 26, Behnam clarified that there is a potential for investors to misconstrue the legal certainty established for spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC).
While this now allows investors to expose themselves to Bitcoin without directly holding the asset itself, supervised by SEC-regulated exchanges, he argued there is no regulatory oversight for the cash market of digital assets, such as a crypto exchange.
“There remains nothing firmly in place to address the opaque and inconsistent practices in the cash markets for digital assets.”
Furthermore, Behnam explains that this impacts the transparency of Bitcoin ETFs, particularly regarding issues related to trade settlement, conflicts of interest, data reporting, cybersecurity, customer protections, transparency, and general market integrity.
“The ETPs have taken a speculative and volatile asset, wrapped it in a thin layer of indirect regulation, and packaged it as a shiny new product,” he stated
The enforcement of crypto regulations has been a prominent topic of discussion within the U.S. government in recent times, prompted by the demand from the crypto industry.
In September 2023, Cointelegraph reported that the CFTC Commissioner Caroline Pham advocated for a limited pilot program to address crypto regulation.
Pham warned that the U.S. may soon need to “play catch-up” to crypto-friendly jurisdictions. She suggested that the program would be similar to regulatory sandboxes previously introduced at the state level.