U.S. CFTC expands its tech innovation team to oversee the crypto market

• CFTC is building its technology team which will replace the existing fintech team dubbed LabCFTC.
• CFTC Commissioner Caroline D. Pham hinted at having cautious optimism while maintaining the balance between crypto innovation and retail protection.

The U.S. Commodities and Futures Trading Commission (CFTC) is working to shoulder the responsibility of regulating the crypto sector. CFTC chief Rostin Behnam said that the regulator is beefing up its technology team for U.S. crypto oversight.

Currently, the CFTC is likely to take up greater authority over digital assets under the Bipartisan Bill proposed last month by Sen. Cynthia Lummis (R-Wy) and Kirsten Gillibrand (D-NY). The bill titled Responsible Financial Innovation Act has been one of the most-detailed crypto legislative proposals so far.

While speaking at the Brooking Institution event on Monday, July 25, CFTC chief Rostin Behnam said: “We are past the incubator stage, and digital assets and decentralized technologies have outgrown their sandboxes”.

Interestingly, CFTC’s new tech innovation office seeks to replace its existing FinTech team dubbed LabCFTC. The LabCFTC project was kickstarted by previous CFTC Chairman Christopher J. Giancarlo who was popular as “Crypto Dad” due to his strong blockchain advocacy.

Speaking at the event, the CFTC chief expressed the desire that his agency is keen to take more responsibility. This comes at a time when the U.S. SEC has also been seeking greater jurisdictional and oversight powers in the crypto sector.

“Encouraged” by regulatory efforts

During his speech, he was “encouraged” by legislative efforts to create a consistent regulatory approach. He added:

Even the strongest co-operative relationships may not yield the efficiency we need to put hard and fast stops to misconduct that increasingly has impacts beyond individual investors.

The lack of a comprehensive regulatory regime, applicable to businesses operating in the digital asset market has led to inconsistent practices around issues such as trade settlement, conflicts of interest, data reporting, and cybersecurity.

On the other hand, CFTC Commissioner Caroline D. Pham shared her insights about the key fundamentals responsible for the cryptocurrency markets. She notes that the recent crypto crash, liquidity crisis, crypto credit leverage, and retail losses make it clear that there needs to be a striking balance between crypto innovation and retail protection.

She further added that the CFTC is capable enough for dealing with different facets of the crypto sector. Caroline Pham said that cryptocurrency trading in many ways is similar to emerging markets FX trading. But the CFTC commissioner adds that it is necessary to address some key challenges of the crypto sector. She wrote:

We must mitigate systemic risk.  We’ve seen disruptions spread from the collapse of projects such as Terra and Luna, revealing potentially undisclosed connections, exposures, and interdependence among large participants that increase the risk of spread amongst and beyond crypto.  We need to address this.

Overall, the approach of CFTC executives looks optimistic when it comes to bringing regulatory rules to the crypto space.