CFTC commissioner: Agency doesn’t have enforcement resources without Congress

Published at: Sept. 21, 2021

Dan Berkovitz, one of three commissioners currently serving at the U.S. Commodity Futures Trading Commission, or CFTC, said while the agency is suited to futures contracts, swaps, and options trading, it would need additional resources to handle the cash market for crypto assets.

Speaking at the Managed Funds Association Digital Assets Conference on Tuesday, Berkovitz said the Commodity Futures Trading Commission enforcement actions in the crypto space have been “aggressive,” citing a $100 million civil monetary penalty against derivatives exchange BitMEX. Though he said the agency had the “capability and the expertise” to further regulate crypto assets, it was currently unable to do so due to a “resource issue.”

“If Congress were to determine that our jurisdiction should be expanded to somehow regulate the cash market, we would really need additional resources to do that,” said Berkovitz. “Cryptocurrency markets, we’re not necessarily looking for more authority without more resources. We’re staying in our lane.”

Berkovitz noted there was “a lot of coordination” between the agency, the Securities and Exchange Commission, the Financial Crimes Enforcement Network, the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Department of the Treasury. The CFTC worked with the Financial Crimes Enforcement Network to settle the case against BitMEX, and has coordinated with the SEC to investigate trading apps dealing in crypto.

“We’re all pretty familiar with the lanes that we go in,” said Berkovitz, referring to the jurisdictions of the respective agencies. “I think coordination is actually excellent.”

The CFTC commissioner also doubled down on his comments from June that decentralized finance platforms were likely illegal under the Commodity Exchange Act. According to Berkovitz, there was a “spectrum of centralization” around projects in the DeFi space that could make them subject to registration at the CFTC.

Five commissioners normally serve at the CFTC, but the agency has been shaken up by the departure of former chair Heath Tarbert in January and Brian Quintenz on Aug. 31. Berkovitz has also announced he plans to leave the commission on Oct. 15, leaving only acting chair Rostin Behnam and Dawn Stump.

Earlier this month, President Joe Biden said he planned to nominate Behnam to assume his position on a permanent basis in addition to filling the remaining seats with law professor Kristin Johnson and former SEC enforcement division senior counsel Christy Goldsmith Romero. All must be confirmed by the Democrat-controlled Senate, but the White House has not yet announced a possible replacement for Berkovitz.