What is the US Commodity Futures Trading Commission (CFTC)?
CFTC headquarters building in Washington – Source: Kennyhertz Perry
The Commodity Futures Trading Commission, or CFTC, is a federal agency tasked with promoting the integrity, vibrancy, and resilience of the derivatives market.
This agency was established in 1974 when the Commodity Futures Trading Commission Act was enacted. At that time, most futures trading occurred in the agricultural sector, but it has since become much more diversified.
The CFTC currently oversees commodity futures and options markets in the United States. The agency’s role was expanded following the passage of the Dodd-Frank Act in 2010, bringing over-the-counter derivatives, known as swaps, under its regulatory purview.
The agency’s mission is to prevent excessive speculation, price manipulation, and fraud. The CFTC supervises derivatives clearing organizations, swap execution facilities, and designated contract markets, among other entities.
Inside the CFTC
The Commission consists of five commissioners who are appointed by the U.S. President with the advice and consent of the Senate. Each commissioner serves a five-year term. No more than three commissioners from the same political party can serve at any given time.
The agency is divided into 14 divisions and offices. The Division of Enforcement investigates and prosecutes entities and individuals who violate the agency’s regulations and the Commodity Exchange Act.
The CFTC also maintains an office focused on technology innovation that serves as the agency’s “financial technology innovation hub,” according to their website.
Derivatives trading and financial markets oversight – Source: Investopedia
The CFTC’s Role in Cryptocurrency
The agency has classified bitcoin and ether as commodities. However, its sister agency, the Securities and Exchange Commission, has maintained inconsistent positions on whether ether could be considered a security and fall under their jurisdiction.
The CFTC oversees the trading of futures and options contracts related to cryptocurrencies and ensures these markets operate fairly and transparently. The agency can also initiate enforcement actions and conduct market surveillance to detect manipulation and abusive trading practices in cryptocurrency derivatives markets.
US cryptocurrency regulation and law enforcement – Source: CoinGeek
Current CFTC Chairman Rostin Behnam has stated that the agency does not have direct jurisdiction over the digital asset spot market and can only take action regarding fraud or manipulation in this area.
