The United States Commodity Futures Trading Commission (CFTC) ‘s acting chairperson, Caroline Pham, has announced reorganizing the agency’s Enforcement division to bring to an end the era of regulation by enforcement and instead focus on helping victims by attacking fraud head-on.
Pledge to Create Two Task Forces
According to a press release by the CFTC, the agency will create two units out of the previous task forces to target complex fraud, retail fraud, and general enforcement. Caroline Pham reiterated that the agency would now focus its resources on targeting fraudsters and other bad actors.
The agency’s statement further revealed that its deputy director of enforcement, Paul Hayeck, would serve as the chief of the complex fraud task force. In contrast, the other deputy director of enforcement, Charles Marvine, would lead the retail fraud team on an acting basis.
Pursue Bad Actors, not Punish Good Citizens.
Caroline Pham was recently tapped to head the agency in an acting capacity following the inauguration of US President Donald Trump. Immediately after she took office, Pham pledged to work constructively with industry stakeholders. On the trajectory that the CFTC would be taking, Pham’s statement said:
“This simplified structure will stop regulation by enforcement and is more efficient. These much-needed changes will maximize the CFTC’s resources to bring more actions to pursue fraudsters and other bad actors and not punish good citizens. I commend the Division of Enforcement for upholding the CFTC’s mission to protect the American public.”
Promise to End Regulation by Enforcement
Under the Biden administration, the crypto industry mostly complained about the lack of a clear regulatory framework and the Securities and Exchange Commission (SEC) ‘s practice of operating using the regulation-by-enforcement formula. During the 2024 US presidential campaign, the Trump administration promised to fix the problem by filling the regulatory gap and propelling a broader deregulation agenda to promote innovation within the blockchain and cryptocurrency sectors within the first 100 days of his presidency.
The SEC or the CFTC?
Historically, there has always been a serious disagreement between legislators and crypto industry players on whom the SEC and the CFTC had the right to regulate the cryptocurrency industry. Under the leadership of the former SEC chair, Gary Gensler, there was a hot debate on whether cryptocurrencies were commodities or securities. Gensler regularly hauled crypto companies to court, where they would be found in breach of securities laws and fined millions of dollars.
Trump Nominated Crypto-Friendly Individuals
One of Trump’s biggest promises during his campaigns was to end the era of regulation by enforcement. President Trump seems keen on keeping his pledges, considering the caliber of the people he has nominated to lead key agencies dealing with the crypto subject. Trump’s pick to replace Gensler, Paul Atkins, is considered friendly to the crypto industry. Pundits expect Congress to augment the President’s efforts by introducing bills that will rebalance the SEC and CFTC jurisdiction and enforcement powers.
Conclusion
CTFC acting chair Caroline Pham’s move to raise eyebrows on the efficacy of the regulation by enforcement formula that has characterized the commission’s actions in the past sends an appositive signal to the crypto industry. In the future, there’s every chance the CFTC will foray into untested waters to help create standards that will define a clear regulatory framework and bring meaningful change to the crypto industry.
Frequently Asked Questions (FAQs)
What does FCTC regulate?
The CFTC regulates the US derivatives markets, including commodity futures, options, swaps, and over-the-counter (OTC) markets.
What does the SEC regulate?
The US SEC oversees securities brokers and dealers, investment advisors, and mutual funds to promote fair dealing and prevent fraud.
Who, between the SEC and CFTC, regulates crypto?
The SEC and CFTC regulate cryptocurrencies, each with a different jurisdiction. The agencies have both taken legal action in the past to regulate crypto assets.
What is regulation by enforcement?
This refers to a regulatory approach in which agencies enforce compliance with rules by investigating and penalizing instead of providing proactive education and clear guidelines on rules upfront.
References
National Law Review
CFTC Press release
Coindesk
