SEC and CFTC Chairs Discuss Crypto Regulation at ISDA Meeting

The annual meeting of the International Swaps and Derivatives Association (ISDA) started in Madrid on Wednesday. United States Securities and Exchange Commission (SEC) Chairman Gary Gensler and US Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam were both keynote speakers at the event, with Behnam speaking in the morning session and Gensler speaking in the afternoon.

Behnam spoke at length about “a motion for an amended derivatives clearing organization (DCO) registration order by an entity seeking to offer non-intermediary clearing of margined products to retail participants,” which is clearly a reference to the motion by FTX US was.

“Given that other registered entities have expressed an interest in exploring similar models and given the potential impact on clearing members and FCMs [futures commission merchants]” […] Being transparent and providing an opportunity to hear from the public is paramount,” Behnam said, encompassing the CFTC roundtable on the issue to be held later this month.

FTX CEO Sam Bankman-Fried may have overheard Behnam speaking as Bankman-Fried was present at the conference and participating in a fireside chat a few hours later.

Behnam continued to recall his testimony before the Senate in February, saying:

“I will continue to advocate for and support the CFTC’s legislative authority to develop a regulatory framework for the digital cash commodity market.”

Currently, the CFTC only regulates the derivatives markets, although it has exercised enforcement powers over the cash markets, such as B. the fine it imposed on Coinbase for improperly reporting exchange volume and “proprietary trading” in 2021.

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

Gensler spoke about “the intersection of crypto assets with derivatives” in his much shorter speech. He said:

“When platforms — whether in decentralized or centralized finance — offer collateral-based swaps, they are impacted by securities laws and must function within our securities regime.”

Gensler emphasized the need for the ISDA to “recognize that if the underlying asset is a security, the derivative must comply with securities regulations” when developing legal standards for crypto derivatives.