Yesterday the U.S. Financial Stability Oversight Council (FSOC) published a report on Digital Asset Financial Stability Risks and Regulation. It identified three regulatory gaps and made several recommendations.
The first issue is that cryptocurrencies not classified as securities lack a direct regulator. Hence it proposes that Congress enact legislation to close that gap. While not suggesting which regulator is appropriate, the report notes that the Commodity Futures Trading Commission (CFTC) primarily has experience in dealing with wholesale markets as opposed to retail investors.
While the CFTC has responsibility for crypto derivatives, it can only take enforcement action in the cash market if there’s manipulative or fraudulent behavior, but it’s not the cash market supervisor or regulator. The report was careful only to classify Bitcoin as a non-security crypto-asset, referring to “possibly other crypto-asset that are not securities.”
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