Regulation Is Coming, Bitcoin Will Benefit – Bitcoin Magazine
This is an opinion editorial by Shane Neagle, the editor-in-chief of “The Tokenist”.
The continued discussion of the need for a comprehensive US regulatory framework to identify opportunities and risks within the rapidly growing Bitcoin sector has captured the attention of the wider public.
Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), recently said that proper regulation of the cryptocurrency space could have significant positive effects on market growth, especially for bitcoin.
“Growth can occur if we have a well-regulated space,” Behnam said during his appearance at the New York University School of Law.
Behnam also said, “Bitcoin could double in price if it’s a CFTC-regulated market,” which made headlines around the world. His comments are not surprising given that he has stressed the need for regulatory clarity in the Bitcoin market several times in the past.
The CFTC and SEC must work together
Earlier this year, representatives of the Senate Agriculture Committee, which oversees the CFTC, proposed a new bill that would make the CFTC the primary regulator of the digital asset industry and strengthen its control over cryptocurrency spot markets. The bill would also require trading companies to register with the CFTC. Behnam voiced his support for the bipartisan bill, which would also allow the CFTC to collect fees from regulatory entities and enhance its financial power.
“We are [currently] appropriated money by Congress, and it’s put us in a position where we feel like we’re constantly on the edge of how much money we want to be appropriated,” Behnam added during the NYU School of Law event. “We still feel the wounds and the scars after about five or six years of flat funding.”
Behnam added that its modest financial budget and other headwinds have also prevented the agency from mounting a proper fight against crime involving bitcoin and other digital assets. Because the CFTC has no jurisdiction, the agency lacks traditional monitoring services and market oversight solutions to properly monitor trading platforms and other intermediaries, Behnam further noted.
These remarks come about a month after former CFTC Chairman Timothy Massad called for the CFTC and the US Securities and Exchange Commission (SEC) to come together and address the current crypto-regulatory gaps by establishing a self-regulatory organization (SRO).
Massad argued that neither the CFTC nor the SEC has the necessary power to regulate bitcoin and other digital assets. Currently, there is a significant gap in regulating what he called the “cash market for cryptoassets.” This includes bitcoin trading activities on exchanges such as Coinbase or Kraken. While the US Congress has tried to address this problem through several bills, Massad believes that the solution lies in an SRO.
Earlier this month, SEC Chairman Gary Gensler said he supports the idea of giving the CFTC the role of top non-securities regulator for cryptocurrency, though Congress should not overlook the SEC if that happens. He stressed the importance of ensuring that securities laws governing the $100 trillion capital markets are not undermined, as these laws have made capital markets the envy of the world.
Currently, the CFTC is only responsible for regulating cryptocurrency derivatives, although many in Washington and the bitcoin-centric industry seem to support the idea of handing the reins of cryptocurrency regulation to the agency.
Who will benefit from the regulation?
The idea that a well-established regulatory framework could attract more institutional investors and increase the use of the bitcoin market is a stance that many in the industry have called for. Behnam also argued that digital asset firms see significant potential “for institutional inflows that will only happen if there is a regulatory structure around these markets.”
Behnam added that Bitcoin projects “thrive with regulatory certainty” and the organization hopes to have more clarity in the near future that will allow these companies to continue to deliver innovative products that change people’s lives. Again, this stance is not surprising as Behnam has consistently argued for the need to provide market participants with regulatory clarity – something many in the industry have argued is lacking.
Finally, putting bitcoin under the supervision of the CFTC could put the entire securities discussion to bed. This increased clarity and visibility could then pave the way for more institutional players – who insist on having a clear framework regulating digital assets – to increase their exposure to bitcoin.
But while many are calling for more regulatory clarity, some analysts believe a sweeping regulatory framework could hurt some of the biggest businesses in the US, including Coinbase. Wells Fargo analysts began research coverage on Coinbase with an underweight rating, citing, among other things, the risk of a more restrictive government stance toward digital assets.
A tougher regulatory environment as well as continued macro headwinds could have a material impact on Coinbase’s volumes and revenues in 2023, analysts wrote in the initiation note.
“Regulation in particular will be a challenge for COIN, for example, note the recent discussion coming from the SEC about ‘cryptos as securities’ (eg for assets that are staking),” Wells Fargo analysts added.
The bottom line
For years, the CFTC and SEC have been at loggerheads over the role of top regulator of the cryptocurrency industry. Both have been reluctant to issue much in the way of formal guidance for Bitcoin companies, opting instead to set a regulatory precedent through enforcement actions.
While some industry experts do not support the creation of a comprehensive regulatory framework for Bitcoin, many continue to stress the importance of having more clarity in this area. While many Bitcoin natives remain opposed to any regulation, the added clarity could further accelerate the development of the asset.
This is a guest post by Shane Neagle. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
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