Trump Plans to Make CFTC Lead Crypto Regulator

President-elect Donald Trump’s administration is reportedly considering granting the Commodity Futures Trading Commission (CFTC) greater authority over the cryptocurrency market, specifically Bitcoin and Ethereum. This plan would reduce the Securities and Exchange Commission’s (SEC) role in regulating digital assets and shift primary oversight to the CFTC, which is traditionally focused on commodities and derivatives.

Under this proposal, the CFTC would oversee Bitcoin and Ethereum spot markets, treating them as commodities rather than securities. Together, these two cryptocurrencies account for about 70% of the global market, valued at approximately $2.24 trillion. The crypto industry largely favors the CFTC’s lighter regulatory touch, viewing it as an opportunity to reduce barriers to innovation. Former CFTC Chair Christopher Giancarlo, known as "Crypto Dad," has publicly supported the agency’s expanded role, stating it could begin regulating digital commodities immediately with sufficient funding and leadership.

This initiative reflects dissatisfaction with the SEC's enforcement-driven approach under outgoing Chair Gary Gensler, who has been criticized for aggressively targeting crypto firms. It also aligns with Republican priorities of fostering innovation and reducing regulatory hurdles. Shifting oversight to the CFTC could harmonize the regulatory landscape and address the longstanding debate over whether digital assets should be classified as securities or commodities.

For years, the SEC and CFTC have clashed over jurisdiction, creating a fragmented regulatory environment that has pushed some crypto businesses to move operations overseas. While the SEC views most cryptocurrencies as securities, the CFTC treats Bitcoin and Ethereum as commodities. This inconsistency has created uncertainty, stifling the industry's growth.

A bipartisan legislative effort, the "BRIDGE Digital Assets Act," aims to foster cooperation between the two agencies. Led by Tennessee Congressman John Rose, the act proposes a joint advisory committee of 20 private-sector representatives to harmonize regulatory policies. The bill criticizes the current enforcement-driven model, arguing it discourages innovation in the U.S. and promotes overseas investment.

CFTC Chair Rostin Behnam has already shown interest in broader crypto regulation, previously asserting the agency’s authority over Ethereum. The proposed changes could resolve disputes between the CFTC and SEC, such as the SEC’s 2023 classification of all Proof-of-Stake tokens as securities, which conflicted with the CFTC’s view of Ethereum as a commodity.

The crypto community has largely welcomed the idea of the CFTC taking the lead. Many view the agency as more favorable toward crypto innovation compared to the SEC. One user commented, “The SEC will no longer be able to strangle the crypto market… The CFTC operates more gently, focusing on institutional players who can handle risks better.”

However, challenges remain. The CFTC’s annual budget of $400 million and staff of 700 are significantly smaller than the SEC’s $2.4 billion budget and 5,300 employees. To effectively oversee the crypto spot market, the CFTC would require a substantial increase in funding and resources. Critics have also raised concerns about the potential impact on traditional CFTC constituencies, such as agricultural commodity traders. Addressing these issues in legislative language will be crucial to ensuring bipartisan support.

The shift in regulatory focus could provide clearer guidelines for the crypto industry and investors while reducing conflicts between agencies. If implemented, the CFTC-led framework could mark a significant step toward resolving regulatory uncertainty and fostering growth in the U.S. cryptocurrency market. The Trump administration's plan, combined with the bipartisan legislation, may reshape how digital assets are regulated, with the CFTC poised to play a central role.