CFTC to restructure LabCFTC to be more proactive in digital assets regulation efforts

The Commodity Futures Trading Commission (CFTC), the U.S. derivatives market regulator, is looking to gain more footing in the digital assets space. According to CFTC Chairman Rostin Behnam, the commission will explore all its existing powers to become more proactive and comprehensive in its digital assets regulation efforts. 

He made the remark while speaking at a webinar on “The Future of Crypto Registrations” hosted by the Brookings Institute. He stated that one way the CFTC will pursue this objective is to restructure some of its enforcement and policy units. 

To this end, Behnam announced that the CFTC will restructure LabCFTC—a unit focused on “efforts to promote responsible fintech innovation and fair competition.” LabCFTC will now “take on a new identity as the Office of Technology Innovation (OTI) with an updated operating model,” and will report directly to the office of the chairman.  

The commission will also realign the Office of Customer Education and Outreach, a unit within the Office of Public Affairs. The new mandate of the unit will be majorly focused on educating consumers about digital assets scams and is necessitated by the more than 46,000 people that have lost over $1 billion to such scams since the start of 2021, Behnam noted. 

“Make no mistake: we will use all levers at our disposal, and all relevant authorities to continue rooting out fraud and manipulation,” he said. “I have asked the staff to be proactive in considering the extent to which our authority can be leveraged to bring these novel products into the regulatory fold to ensure important protections for customers and market integrity provided by CFTC regulation,” he revealed. 

He added that the focus has become urgent as decentralized technologies have outgrown their “sandboxes.” If left unregulated, retail investors, which form a significant portion of participants in digital assets derivatives markets, could face the most risk.

CFTC still seeking more regulatory powers over digital assets 

Behnam’s resolve to work with the CFTC’s existing powers is coming after months of lobbying to expand the regulator’s oversight of the digital assets market. Back in January, Reuters reported that the CFTC made its first official statement on its jurisdiction of the digital assets market, asking Congress for more powers. 

It may soon see the request granted as a bipartisan bill focused on providing regulatory clarity for the market—the Responsible Financial Innovation Act—is making progress in the House. The bill will elevate the digital assets oversight roles of both the CFTC and the SEC. 

Meanwhile, the regulator is already recording successes in its consumer protection efforts in the digital assets space. It has filed several digital assets derivatives fraud cases, including the recently filed case against the founder of Mirror Trading International Proprietary Limited (MTI). 

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