cftc

That’s ‘Sir’ Crypto Dad: French order knights former CFTC chair Chris Giancarlo

The first of his name, king of the punks and the first regulators, protector of the seven tokens, the keeper of the great CBDC, the breaker of blockchains and father of crypto.

The French government has given former United States Commodity Futures Trading Commission chair Chris Giancarlo, also known as “Crypto Dad,” the equivalent of a knighthood.

In a Tuesday tweet from Giancarlo, the former CFTC head said France’s National Order of Merit awarded him a Chevalier — the equivalent of a knighthood — in a ceremony at the French ambassador’s residence in Washington D.C. Those attending included current and former CFTC commissioners Rostin Behnam, Brian Quintenz, Christy Goldsmith Romero, Kristin Johnson, Caroline Pham, as well as Hester Peirce of the Securities and Exchange Commission.

The order announced Giancarlo’s appointment in May. Phillippe Etienne, France’s ambassador to the United States, said the award was due, in part, to the former CFTC chair’s “understanding of financial markets and the potentials of crypto finance.”

“[This award] recognizes the creation of well-regulated crypto trading markets and strengthening of overseas regulatory ties with the help of many fine public servants during my time of government service,” said Giancarlo at the time.

Giancarlo worked as the chair of the CFTC for five years before leaving in April 2019. During his time with the government agency, he oversaw the launch of regulated Bitcoin (BTC) futures and was alleged to have had a “do no harm” approach to blockchain regulation, earning him the nickname Crypto Dad.

Since leaving the CFTC, Giancarlo has gone on to join blockchain investment firm CoinFund as a strategic adviser, the board of directors for blockchain startup Digital Asset, and briefly, the board of crypto lending firm BlockFi. He currently works as a senior counsel at the law firm Willkie Farr & Gallagher.

Related: Emmanuel Macron on crypto: ‘I don’t believe in a self-regulated financial sector’

Other individuals who have previously been knighted by their respective governments have joined the crypto space in various ways. Sir Richard Starkey, also known as Beatles member Ringo Starr, launched his own line of nonfungible tokens on June 13. Star Trek star William Shatner, who tokenized a series of trading cards in 2020, was inducted into the Order of Canada in 2019 — though many have said the honor is not equivalent to a knighthood.

SEC boss worries crypto bill undermines financial protections

A provision in the bill gives authority over some cryptocurrencies to the Commodity Futures Trading Commission (CFTC), with the agency head saying it cares about having “rigorous oversight of markets.”

United States Securities and Exchange Commission (SEC) Chair Gary Gensler said he’s worried that a proposed bill to create a regulatory framework for cryptocurrencies could weaken investor protections in the traditional financial market.

Speaking at The Wall Street Journal’s CFO Network Summit on Tuesday, Gensler was asked his thoughts regarding a recent bill introduced on June 7 by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY).

He responded, saying “we don’t want to undermine the protections we have in a $100 trillion capital market,” adding:

“We don’t want our current stock exchanges, mutual funds, or public companies to, sort of inadvertently by a stroke of a pen, say ‘you know what, I want to be non-compliant as well, I want to be outside of this regime that I think has been quite a benefit to investors and economic growth over the last 90 years.’”

The bipartisan Lummis-Gillibrand “Responsible Financial Innovation Act” aims to address many facets of crypto regulation such as tax treatment of digital assets, stablecoins, and agency jurisdiction.

One provision of the bill gives “clear authority” to the Commodity Futures Trading Commission (CFTC) over digital asset spot markets, Gensler has long been adamant in declaring most cryptocurrencies are securities, subject to the SEC’s authority.

The Senators have mostly agreed with Gensler’s point, saying some altcoins would likely be considered securities under the proposed law, with Bitcoin (BTC) and Ether (ETH) considered to be commodities.

At the summit, Gensler said the SEC wasn’t looking to extend its jurisdiction and that some cryptocurrencies are already under the jurisdiction of the agency since they qualify as being a security:

“We’re just looking out for the retail public […] These tokens are being offered to the public, and the public is hoping for a better future. That’s the characteristics of an investment contract.”

Meanwhile, CFTC commissioner Christy Goldsmith Romero — who says she hasn’t yet read the Lummis-Gillibrand bill — welcomed regulatory action by Congress when speaking at an event on Tuesday.

Related: SEC reportedly launches investigation into insider trading on exchanges

Romero, also a former senior counsel in the SEC’s enforcement division, was asked if the view that the CFTC was a more laissez-faire regulator in comparison to the SEC was accurate.

“No, not at all […] they’re actually pretty similar,” she said, adding that the CFTC has brought multiple enforcement actions in the crypto space, and each agency cares about having “rigorous oversight of markets.”

Explaining the differences she’s witnessed, Romero said the CFTC has allowed more cryptocurrency products to trade on its regulated exchanges, with 18 products trading across 11 regulated entities:

“What that means is that the CFTC is pretty experienced and how to regulate trading in this market, and that’s really, really helpful as we move forward. It’s still going to take cooperation and coordination with the SEC, I’m 100% committed to that, that’s my former home.”

Lummis-Gillibrand bill establishes SEC-CFTC balance of power over crypto markets

The comprehensive new bill sorts out regulators and addresses taxes, environmental impact, security and other major questions surrounding digital assets.

The long-awaited Responsible Financial Innovation Act to create a regulatory framework for digital assets was introduced in the United States Senate on Tuesday. The official text of the 69-page document was also released. 

The bipartisan bill, sponsored by Senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, “addresses CFTC and SEC jurisdiction, stablecoin regulation, banking, tax treatment of digital assets, and interagency coordination,” according to a statement. The statement continues, “Understanding that most digital assets are much more similar to commodities than securities, the bill gives the CFTC clear authority over applicable digital asset spot markets.”

The senators appeared on CNBC Tuesday morning, and a large part of the interview revolved around splitting responsibilities between the SEC and CFTC.

“We’re trying to just fit the digital asset world into our current regulatory framework. […] We spent a lot of time on the definition of the modern Howey test,” Lummis added. She said that she was meeting with SEC chairman Gary Gensler that day, and Gillibrand had met with him the day before. She added:

“We’re going to continue to work with both the CFTC and the SEC to make sure that we both have found the right mix of using the Howey test to sort out which of those agencies best can regulate. We think that, because we’re using the Howey test, it’s going to come out just fine.”

“It is our job fundamentally for Congress to write these laws and the regulators to implement them. They don’t decide what they get to keep and what they don’t,” Gillibrand said in that interview.

Gensler has been adamant in declaring most cryptocurrencies are securities subject to his agency’s authority.

Related: SEC chair uses crypto enforcement in justification for FY2023 budget

The CFTC, which is far smaller than the SEC, will be authorized to collect fees from entities engaged in cash or spot digital asset activities to finance its additional regulatory responsibilities.

The bill addresses a range of issues relating to crypto. It commissions a study on the environmental impact of digital assets, creates an advisory committee on innovation and orders the development of cybersecurity guidelines. It also creates a tax structure and mandates an analysis of the use of digital assets in retirement savings.

“It takes a long time to build a regulatory framework for a new industry,” Gillibrand said. The bill now has to pass through the Senate banking, agriculture, intelligence and financial services committees.

Blockchain Association executive director Kristin Smith said in a statement on the association’s website, “The bipartisan legislation announced today by Senators Lummis and Gillibrand represents a milestone moment for crypto policy and a major step forward for the crypto industry in Washington.”

Leaked copy of US draft bill shows DeFi and DAOs under regulatory lens

The draft bill proposes to eliminate anonymous crypto projects, with DAOs, DeFi and exchanges required to legally register in the United States.

A leaked copy of a United States draft bill concerning cryptocurrency started doing the rounds on Twitter earlier on Tuesday. The 600-page copy of the leaked bill highlights some of the key areas of concern for regulators including decentralized finance (DeFi), stablecoins, decentralized autonomous organizations (DAOs) and crypto exchanges.

User protection seems to be the primary focus of regulators, with policies intended to require any crypto platform or service provider to legally register in the U.S, be it a DAO or DeFi protocol.

This could highly curtail chances for anonymous crypto projects to progress in the United States. Any crypto platform not registered in the country would be liable for taxes, and the definition of DeFi still seems vague.

The leaked draft bill also tries to offer more clarity on securities laws as they relate to digital assets, a demand that has been persistent from the crypto community and lawmakers alike. According to the Commodity and Futures Trading Commission’s definition of a commodity, if there is any debt, equity, profit revenue or dividend of any variety, then it is expressly not a digital asset commodity.

 Related: 30% crypto tax becomes law in India following Finance Bill approval

The new draft bill proposes to increase exchange compliance costs, which in turn could lead to an increase in exchange fees. Any protocol or platform that trades a single digital asset would be categorized as an exchange, meaning that automated market makers would fall under the same category.

The bill further ensures that exchanges cannot liquidate users’ funds in cases of bankruptcy and adds that they must issue terms of services for consumers to agree to before using their services.

The leaked draft bill proposes clear policies to bring the nascent crypto market under the purview of the law. Many experts have pointed out that even though the listed policies seem to encourage strict oversight, it’s only a draft.

Dogecoin co-founder Billy Markus also commented on the leaked bill and suggested that the new policies would be tough on DeFi, DAOs and anonymous projects. 


Bad day for Binance with SEC investigation and Reuters exposé

The SEC is reportedly suspicious that the world’s biggest crypto exchange sold unlicensed securities in its ICO, and the news agency tallied up some old cases.

The United States Securities and Exchange Commission is investigating whether Binance Holdings broke securities rules when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported on Monday.

Binance is the world’s largest crypto exchange, and BNB is the fifth-largest cryptocurrency.

The BNB ICO took place in July 2017 on several platforms during the height of the so-called ICO boom, and the Binance exchange opened just days afterward. According to Bloomberg, citing unnamed people familiar with the matter, at least one U.S. resident claimed to have taken part in the ICO, which could be a crucial fact for an SEC case, if the agency chose to pursue one. The SEC has claimed most cryptocurrencies are securities and brought cases against a number of ICO projects.

Binance founder and CEO Changpeng Zhao, often known as “CZ,” said in a 2020 blog post that the wording of the BNB white paper was changed in January 2019 because “the potential for being misunderstood as a security is higher in certain regions.” Binance’s American arm, Binance.US, was created later that year.

Related: Binance wins dismissal of class action over 2018 tokens that tanked

Also on May 6, Reuters published a lengthy special report alleging that Binance processed at least $2.35 billion of transactions from hacks, investment frauds and narcotics sales between 2017 and 2021, and had weak Know Your Customer (KYC) and Anti-Money Laundering (AML) protections for those years.

Among other cases, Reuters mentions the hacking of Eterbase, with some of the proceeds being laundered through Binance by North Korean hacker group Lazarus, and Binance’s association with Russian-language drug mart Hydra.

A Binance spokesperson disputed Reuters’ findings, and the exchange told Forbes in a statement that the report is a “woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations.”

Binance is already the object of several U.S. federal investigations, including another SEC probe. The U.S. Commodity Futures Trading Commission began an investigation of the exchange’s trading practices last year.

Binance Markets, its United Kingdom branch, was ordered by the Financial Conduct Authority to cease activities in that county after a review of its operations last year. Additionally, Binance was ordered to cease operations in Ontario last June, although it remained active in the Canadian province until March of this year.

CFTC sues Gemini claiming crypto exchange lied in futures contract evaluation

The agency says the exchange gave false information in person and in documents in its 2017 bid to be among the first to offer Bitcoin futures contracts.

The United States Commodity Futures Trading Commission (CFTC) filed suit against Gemini Trust Co. in the U.S. Southern District Court of New York on Thursday. The CFTC claimed in the civil suit that Gemini made false or misleading statements to the CFTC in 2017 during in-person meetings and in documents, violating the Commodity Exchange Act and other regulations. 

The agency was making an evaluation of the potential self-certification of a Bitcoin (BTC) futures contract to be based on the spot Bitcoin price determined by an auction held on Gemini’s digital asset trading platform.

The CFTC was considering whether the proposed Bitcoin futures contract would be susceptible to manipulation. The proposed Bitcoin futures contract would have been among the first digital asset futures contracts listed.

Gemini is the cryptocurrency trading platform founded by brothers Cameron and Tyler Winklevoss. It announced staff cuts Thursday and is preparing to lay off 10% of its workers due to the crypto market downturn. 

The CFTC said in a statement that it is seeking disgorgement of ill-gotten gains, monetary penalties and injunctions relating to registration and trading and against further violations of the Commodity Exchange Act. 

Related: Bipartisan bill to give CFTC authority over exchanges and stablecoins

“This enforcement action sends a strong message that the Commission will act to safeguard the integrity of the market oversight process,” CFTC acting director of enforcement Gretchen Lowe said in the statement.

Gemini told Cointelegraph in a statement: 

“Gemini has been a pioneer and proponent of thoughtful regulation since day one. We have an eight year track-record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court.”

Bitcoin futures began trading on the CBOE on December 10, 2017, based on the price of the cryptocurrency on the Gemini exchange.

Goldman Sachs reportedly eyes crypto derivatives markets with FTX integration

FTX has sought to integrate brokerage services internally to fulfill trades automatically, however, CFTC has called for greater scrutiny of the demand as it would lead to a monopoly of big players.

Goldman Sachs, one of the leading investment banks in the United States is reportedly trying to onboard some of its derivatives products into FTX.US crypto derivatives offerings.

Goldman Sachs has been in talks with FTX over regulatory and public listing help, and aims to expand into offering crypto derivatives by leveraging some of its own derivatives tools and services, reported Barron’s.

FTX.US, the U.S. subsidiary of global cryptocurrency exchange FTX is currently seeking to offer brokerage services for its derivatives offerings. This would allow the crypto exchange to handle the collateral and margin requirements internally rather than depending on “futures commission merchants” (FCMs). FTX.US president Brett Harrison said:

“We have multiple FCMs already committed to integrating technologically with the exchange. There are several large ones you can probably name.”

The U.S. Commodity Futures Trading Commission (CFTC) has sought public comments on the requested amendment from the crypto exchange. The chief regulatory body also believes that FTX’s proposal warrants scrutiny as it would lead to a monopoly by large investment banks such as Goldman.

Related: FTX executive Wetjen calls CFTC application an opportunity for the agency to innovate

According to people familiar with the matter, the integration of Goldman Sachs derivatives services would offer “trading futures directly, introducing clients and acting as an on-ramp to the exchange, or providing capital top-ups for clients.”

FTX has argued that an integrated brokerage model would help in making the market more stable and free. In a recent roundtable discussion with the CFTC, CEO Sam Bankman-Fried fielded several questions about crypto derivatives and FTX’s proposal to integrate its own FCM.

Crypto derivatives trading has been a topic of debate for quite some time, with many European countries and even the United States prohibiting most of the crypto exchanges from offering leveraged trading. Binance had to shut its derivatives offerings in several European countries post regulatory interventions.

On one hand, CFTC has called for greater scrutiny of FTX’s amendment demand. On the other, FTX argues that an integrated brokerage model would help them to calculate margin requirements every 30 seconds rather than waiting until the next day to liquidate positions.