CFTC expanding role under Trump administration, will it favourable for crypto?

Commodity Futures Trading Commission (CFTC)  under Trump administration:

Giancarlo believes that with proper funding and leadership, the CFTC could start regulating digital commodities effectively from day one of Trump’s presidency

The incoming Trump administration plans to expand the role of the Commodity FuturesTrading Commission (CFTC) by giving it oversight of a significant part of the $3 trillion digital asset market. This move is part of a broader effort by President-elect Donald Trump and the Republican-majority Congress to reduce the regulatory power of the Securities and Exchange Commission (SEC) over the digital asset industry, which had been increased under President Biden and his SEC chairman, Gary Gensler.

The CFTC, often seen as the "little sister" of the SEC, is currently responsible for overseeing the $20 trillion U.S. derivatives market, which includes futures, options, and physical commodities like gold and oil. Unlike the SEC, the CFTC is considered to have a lighter regulatory touch, as it primarily deals with sophisticated institutional investors. With Trump in office, the CFTC’s role could expand to include regulating the spot markets for digital assets like Bitcoin and Ethereum, as well as the exchanges where they are traded.

Former CFTC Chairman Chris Giancarlo believes that with proper funding and leadership, the CFTC could start regulating digital commodities effectively from day one of Trump’s presidency. This shift would give the CFTC authority over the spot market for Bitcoin and Ethereum, which account for a large portion of the global crypto market, providing much-needed regulatory clarity for the industry. Currently, both the SEC and the CFTC have been regulating the crypto space through enforcement actions, leading to uncertainty and a preference within the industry for the CFTC’s lighter touch.

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The SEC, under Gensler, has been unpopular in the U.S. crypto industry due to its stringent stance, classifying most cryptocurrencies besides Bitcoin as securities. In contrast, the CFTC, which deemed Bitcoin a commodity as early as 2015, is seen more favorably. Giancarlo, also known as "Crypto Dad," who chaired the CFTC during Trump’s first term, is being considered for a new role as "crypto czar" to help shape crypto policy in the new administration.

The idea of the CFTC taking on a larger regulatory role is welcomed by the crypto industry but raises concerns among traditional CFTC constituencies, like those in the physical and agricultural commodities markets. These concerns need to be addressed carefully in any new legislation. The new administration also faces the challenge of choosing a new SEC head who, besides being pro-crypto, must have strong policy and administrative skills to manage the broader responsibilities of the SEC, which oversees the $100 trillion securities markets.