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- 1 DeFi crypto exchanges can be regulated by U.S. law.
- 2 CFTC Chair believes the cryptocurrency may be launched as security and later as a cash substitute.
To regulate digital assets is always a concern. It is due to crypto market volatility. The Chair, Rostin Behnam of the Commodity Futures Trading Commission (CFTC), shared his views on crypto rules on the podcast “Odd Lots.”
One of the biggest concerns is to distinguish cryptocurrency as securities or commodities. The distinction will help to find answers for how digital assets are regulated. Hence, the CFTC is working with other agencies to develop a regulatory framework.
CFTC Chair Told- Legal Precedents Can Regulate Digital Assets
The CFTC chair stated that U.S. law covers all digital assets. The legal involvement is the reason for the regulatory approach taken by CFTC. By studying and understanding the legal precedent, the CFTC can implement the existing laws and regulations in the digital asset space.
This will ensure the protection of U.S. customers. It can be regulated with legal precedents. He also highlights the significance of protecting U.S. customers in the digital asset space. It is very clear that digital assets can’t be controlled due to its decentralized nature.
So attention should be paid to what the U.S. customers are offered and exposed to and who is behind those offerings. This regulation plays a vital role in the long-term growth of the crypto space and the protection of U.S. customers. U.S. regulators are helping to increase the trust of investors. And also to protect default activities.
Digital Assets Classified As Securities or Commodities?
Behnam also says that many of the characteristics of digital assets are the same as traditional financial assets. And the differences are to be regulated. But one major factor is that it should be classified as securities or commodities.
It means whether it can be used as securities at the time of launch or as a substitute for cash. If a new token is released, then it may involve a pooling of capital to start.
While as the token becomes more decentralized, it can become a commodity. The CFTC Chair also says that this is the biggest challenge in the digital asset space. But, the regulators must be ready for other challenges, too, as it may be risky.
He slammed comments that decentralized finance (DeFi) and decentralized exchanges cannot be regulated. The CFTC Chair’s comment will turn users to decentralized exchanges to trade cryptocurrencies.
So, U.S. law can treat it as non-security. According to Behman’s point of view, cryptocurrency can be regulated by decentralized exchanges where the assets may be treated as cash substitutes.
The cash markets are not regulated by CFTC, and so it has limited authority to police. As a result, it can lead to fraud. Cryptocurrencies offer new opportunities for growth and innovation.
By studying the unique characteristics of cryptocurrency, regulators will get ideas to regulate the digital assets. A systematic approach will lead to better protection of U.S. customers and protect investors. It also helps to maintain the market stability.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
