Hours after the bombshell Securities Exchange Commission (SEC) enforcement actions against Binance and Coinbase, the U.S. House of Representatives’ agricultural committee held a hearing on digital assets market structure.
The line-up included Coinbase’s chief legal officer Paul Grewal, Robinhood’s chief legal compliance officer Dan Gallagher, former Commodities Futures Trading Commission (CFTC) Chairman Christopher Giancarlo and current CFTC Chairman Rostin Behnam among others.
The purpose of the June 6 hearing was to discuss a draft bill on crypto market structure proposed by Patrick McHenry, the chair of the House Financial Services Committee, and Glenn Thompson, the chair of the House Agriculture Committee.
The bill, which was introduced late last week, tackles the thorny issue of whether crypto assets are commodities or securities. It presents a middle ground with a framework that enables digital assets, which at one point could have been viewed as a security, to now qualify as a commodity if they are able to show that their blockchain is sufficiently decentralized.
The debate around whether crypto assets are commodities and securities has intensified this week following the SEC’s charges against Binance and Coinbase alleging that both firms sold tokens, which were unregistered securities. Coinbase has frequently been outspoken about the lack of clarity from the SEC on this issue.
During the hearing, CFTC’s Behnam said in his testimony that he was “encouraged” by the bill’s approach to address the regulatory gaps facing digital assets. He supported the efforts by the committee to provide the CFTC with additional authority to oversee digital assets but cautioned that this should be done without infringing on existing laws.
However, Behnam also warned Congress during the hearing that implementing these rules could take years with or without funding. He estimated that with additional funding for regulating digital assets, the rules could be implemented in one to two years. However, it could take three to four years without the funding.
“For any regulator taking on new authority, it is imperative that the Congress provide the resources necessary to implement that new authority,” said Behnam in his testimony. “Regulation of the digital commodity market will bring new responsibilities to the CFTC that cannot be managed by simply folding the market into our existing regulatory regime with existing resources.”
The CFTC’s current budget is $365 million and the agency is requesting $411 million for next year.
The four-hour hearing was split into two sessions. In the afternoon session, Robinhood’s Gallagher said the retail trading platform was “actively reviewing the SEC’s analysis” to determine what actions to take in relation to the tokens listed as securities by the SEC.
The 162-page bill is proposed by key House Republicans, but for it to become law it would also need democratic support.