Today, Commodity Futures Trading Commission chair Rostin Behnam delivered remarks at the FIA Boca 2022 International Futures Industry Conference where he described the CFTC’s priorities for managing commodities markets through what he describes as bursts in market activity. These bursts, in some part due to technology-driven innovation in the markets, reflect the influence of monetary policy and global interconnectedness on markets. Mr Behnam argued that market innovation emerges when there is a backdrop of regulatory reassurance.
Regulatory reassurance means the management of the risks that emerge from the bursts of transformative change in the markets. Mr Behnam sees these risks being managed in one of two general ways. Either the bursts themselves will have to be managed or the markets will have to get comfortable with the fallout from these risks.
Mr Behnam appears to prefer a middle-of-the-road approach by noting that policy priorities rest with core markets by achieving regulatory certainty and creating fail safe market mechanisms.
Two major policy tools stood out during Mr Behnam’s remarks. First was an update on proposed rule making that addresses risk governance for derivatives clearing organizations. DCOs arrange or provide on a multilateral basis for the settlement or netting of obligations.
Second, Mr Behnam wants Congress to pass legislation that gives the CFTC authority to develop a regulatory framework for the cash digital asset commodity market. Mr Behnam noted his support of President Joe Biden’s executive order calling for coordination by financial regulatory bodies to create a framework for ensuring consumer and investor protection in the cryptocurrency market.
What is missing from Mr Behnam’s consumer/investor protection narrative is the portion that discusses government securing its legal tender turf. While the government’s position as source of the nation’s circulating currency is not under immediate threat, the federal government’s concern has often been dressed in the rhetoric of financial stability or economic growth. I believe market makers in the cryptocurrency trade are already mindful of this but earlier predictions about increased scrutiny are taking fruit.