CFTC Set to Oversee $3 Trillion Crypto Market Under Trump Plan

TLDR

• Trump administration plans to give CFTC oversight of $3 trillion digital asset market, focusing on Bitcoin and Ethereum spot markets
• CFTC’s current $400M budget is 5x smaller than SEC’s $2.4B, with only 700 staff vs SEC’s 5,300
• Former CFTC chair Chris Giancarlo (“Crypto Dad”) is being considered for new “crypto czar” role
• Move would reduce SEC’s regulatory power over crypto under Gary Gensler
• Change requires Congressional approval and additional CFTC funding

The incoming Trump administration is preparing to expand the Commodity Futures Trading Commission’s (CFTC) authority to oversee the $3 trillion digital asset market. The plan would specifically target the spot markets for Bitcoin and Ethereum, which together represent approximately 70% of the global cryptocurrency market.

The CFTC currently oversees the $20 trillion U.S. derivatives market, including futures and options trading for commodities like gold, oil, and wheat. Under the proposed changes, the agency would gain new powers to regulate cryptocurrency spot markets and the exchanges where these digital assets are traded.

This regulatory shift would mark a departure from the current approach under SEC Chairman Gary Gensler, who has led an aggressive three-year crackdown on the cryptocurrency industry. Gensler has maintained that most cryptocurrencies, except Bitcoin, should be classified as securities, making both him and the SEC unpopular within the U.S. crypto industry.

Former CFTC Chairman Chris Giancarlo, nicknamed “Crypto Dad,” is being considered for a new position as “crypto czar” in the Trump administration. This role would help execute cryptocurrency policy and potentially oversee an industry-led advisory council. Giancarlo has been a longtime advocate for the CFTC’s expanded role in digital asset regulation.

The Trump administration is considering tasking the CFTC with regulating cryptocurrencies.

Ava Labs founder Emin Gün Sirer also takes part in the institution's Technology Advisory Committee.$AVAX #AVAX @el33th4xor @CFTC pic.twitter.com/yM8eHy0RvK

— Tansu Yegen (@TansuYegen) November 27, 2024

The CFTC’s early engagement with digital assets dates back to 2015 when it classified Bitcoin as a commodity. Under Giancarlo’s previous leadership, the agency approved futures trading for Bitcoin prices, demonstrating its willingness to work with the emerging technology.

However, the CFTC faces substantial resource constraints compared to the SEC. The agency’s 2024 operating budget of $400 million is more than five times smaller than the SEC’s $2.4 billion. The CFTC employs approximately 700 staff members, compared to the SEC’s 5,300.

Current CFTC Chairman Rostin Behnam has highlighted these limitations, noting that about 50% of the agency’s enforcement actions this year targeted crypto businesses, despite having no direct mandate to regulate the industry. Additional funding from Congress would be necessary for the CFTC to effectively police fraud and manipulation in crypto spot markets.

Traditional CFTC constituencies have expressed concerns that expanded authority over digital commodities could affect regulation of physical and agricultural commodities. These concerns would need to be addressed through specific legislative language.

The proposed changes are part of a broader plan to restructure the relationship between the CFTC and SEC, encouraging collaboration on certain crypto policies, including stablecoin regulation. The Trump administration also aims to overhaul the SEC’s culture following Gensler’s tenure, which saw numerous senior official departures.

Giancarlo, who succeeded Gensler as CFTC chairman in 2017, declined consideration for the SEC chairman position, stating he didn’t want to “clean up the mess left by Gary Gensler for a second time.”

The selection process for the next SEC chair remains ongoing, with sources indicating that being pro-crypto is not the only qualification being considered. The SEC’s responsibilities extend beyond cryptocurrency to include oversight of $100 trillion in securities markets.

The implementation of these changes would require Congressional approval and additional funding for the CFTC. The agency would need enhanced resources to effectively monitor and regulate the expanding digital asset marketplace.

Industry participants have generally welcomed the potential shift toward CFTC oversight, viewing the agency as having a lighter regulatory touch than the SEC. This perception stems from the CFTC’s experience dealing with institutional players in derivatives markets.

The current SEC chairman, Gary Gensler, has announced his resignation effective January 20, 2025, setting the stage for potential regulatory changes under the new administration.