The United States President Joe Biden announced his selections for two seats at the United States Commodity Futures Trading Commission. Rostin Behrnam, who has been acting chairman of the derivatives regulator since January, was also nominated by the president to take over the office permanently.
No major obstacles will be faced by the nominees as they must win a simple majority vote in the Senate, which is currently controlled by Democrats. What can the crypto-industry expect from the CFTC if Behnam is elected permanent chairman and Kristin Johnson (Christy Goldsmith Romero) join the agency’s ranks as commissioners.
Strengthening the commission
The CFTC joined the ranks of U.S. government agency that regulate the cryptocurrency market in 2015 by defining Bitcoin (BTC), and other digital currencies, as commodities under the U.S.Commodity Exchange Act. It also claimed jurisdiction in cases where “a virtual currency” is used in a derivatives agreement or when fraud or manipulation is involved in virtual currencies traded in interstate commerce.
The CFTC is five-strong, when fully staffed. This year, it has only been down to an acting chairman and two commissioners. Heath Tarbert, who was the former chairman, left in March. Brian Quintenz, one of the remaining commissioners, resigned at the end August. Dan Berkovitz, the last remaining commissioner, announced his intention of leaving on October 15.
The nominations are made amid criticisms of the Biden administration for not taking enough time to fill vacant positions at several key regulatory agencies, such as the CFTC. The Democrats will have a 3-1 majority in the panel if the new additions are confirmed.
From acting to permanent chairman
Since July 2017, when he was sworn in as a Commissioner, Behnam has served as Acting Chairman. Behnam, who serves under the crypto-friendly Chairman Giancarlo has expressed his support for digital currencies and their potential transformative power on multiple occasions.
One, Behnam stated that cryptocurrencies, or virtual currencies, were to be “part of economic practices of every country, anywhere” at a 2018 regulatory summit. He also acknowledged that regulators may not have the same reach if the proliferation of digital currencies continues.
“These currencies will not be able to access traditional monetary intermediaries such as banks, governments, investors, ministries or international organizations.
Recenty, the acting CFTC boss spoke out about the importance of maintaining a constructive dialogue between policymakers in financial technology and innovators. This is crucial for keeping U.S. innovations at home. Behnam made these remarks regarding a Commission action related to crypto in March 2020:
“I have advocated for a more inclusive discussion regarding the advent and use of financial technology. I believe that an in-depth examination and discussion about the technology within the current legal and regulatory framework will be most beneficial to technologists, market participants, customers, and other stakeholders.”
It seems like the industry wants it, doesn’t? It would be premature to expect the future policies of the derivatives regulator based on these declarations. The CFTC, just like any U.S. financial regulator whose statutory goal it is to protect market participants, can be expected to err in the direction of caution when innovation seems to be in conflict with consumer safety.
Behnam commented on the recent settlement between BitMEX and both the CFTC & FinCEN. He stated: “The CFTC is going to take prompt action whenever activities that impact CFTC jurisdictional market raise consumer and customer protection concerns.”
Christy Goldsmith Romero and Kristin Johnson, Emory University law professors, are Biden’s choices for the vacant CFTC Commissioner seats. Christy Goldsmith Romero is the current special inspector general for the Troubled Asset Relief Program which deals with financial crimes connected to the U.S. government bailout program.
Kristin Johnson’s current research focuses on the implications for emerging financial technologies, including distributed digital ledger technology and artificial intelligence (AI), for financial regulation. Before her academic appointments at Emory, and before that at Tulane, she was employed in corporate finance, including as an assistant general counsel and vice-president at JP Morgan.
Christy Goldsmith Romero, TARP Inspector General investigates financial institution crimes related to bailouts under the program. She works closely with the SEC in this capacity, where she was previously senior counsel in the enforcement section.
The trio seems to be an innovative combination of a chairman who is open-minded and a scholar of financial technology, as well as an expert investigator in financial crime.
Daniel Davis, a partner in law firm Katten Muchin Rosenman LLP, and former general counsel to the CFTC believes that each of Biden’s selections can bring about positive changes in crypto regulation. If he is elected to the office, Acting Chairman Behnam will be in a great position to lead the regulatory conversation.
Related: Slow to begin: Crypto regulators trail blockchain industry
Additionally, Ms. Johnson as well as Ms. Goldsmith Romaro bring great crypto-related credentials to the potential roles of commissioners. Davis also noted the following about the nominees:
Both have taught courses in crypto law school. Ms. Johnson also has extensive writing experience on topics like financial services regulation and how Decentralized Finance (DeFi), could fit within the existing regulatory structure. If confirmed, one would expect that crypto-related topics would be an important part their respective agendas.
It is tempting to be optimistic about the potential CFTC reinforcements in this light. However, there are some caveats. One, Gary Gensler, the current SEC boss, shows that being well-versed in digital finance and teaching Blockchain classes at top universities does not automatically make you an ally for the crypto industry when you take on a high ranking regulatory office.