CFTC Asserts Authority Over Stablecoins Without Congressional Guidance

The head of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, has stated that most stablecoins should be considered commodities, unless Congress directs otherwise. In a press conference following his appearance before the Senate Agriculture Committee on Wednesday, Behnam highlighted that the CFTC has enforced cases against stablecoin issuer Tether and its affiliated exchange BitFinex, suggesting that stablecoins such as USDC could be classified as commodities. However, Behnam acknowledged that he was unsure of how algorithmic stablecoins should be categorized.


Differing on Stablecoin Classification

Behnam’s position differs from that of the Securities and Exchange Commission (SEC), which recently classified Paxos’ U.S.-pegged stablecoin with Binance, BUSD, as an unregistered security, leading Paxos to cease minting BUSD tokens.

Behnam also commented on ether, the second-largest cryptocurrency by market capitalization, stating that it should be classified as a commodity. The SEC has not yet formally declared whether ether is a non-security asset, but former SEC Director of Corporation Finance Bill Hinman stated in 2018 that he viewed ether as decentralized and not subject to securities regulations.

Behnam emphasized the need for comprehensive regulatory legislation from Congress, citing the gap in regulation and the risks and customer protection issues around crypto. The Digital Commodities Consumer Protection Act, co-authored by Sen. Debbie Stabenow and Senator John Boozman, would have granted the CFTC more direct power over crypto exchanges and spot markets, but stalled last year.


Comprehensive Crypto Legislation

During Wednesday’s Senate Agriculture Committee hearing, Senator Roger Marshall asked Behnam about his level of concern over digital assets on a scale of 1-10, to which Behnam replied “7.5.” Senate Banking Committee Chair Sherrod Brown joked that his level was “8.2,” while Marshall’s was “12.”

Behnam’s call for comprehensive legislation continues to resonate with senators, with Sen. Stabenow pledging to continue working on the issue. The CFTC chair believes that such legislation could aid regulators in cracking down on activity by offshore crypto firms that violate U.S. law.