One-third of all CFTC crypto enforcement actions took place this year: Chair Behnam

October 2, 2023 Coin Telegraph

CFTC

CFTC chair Rostin Behnam told an audience at the Financial Industry Association Expo about the agency’s activity in the crypto space and its need for modern legislation.

United States Commodity Futures Trading Commission (CFTC) chair Rostin Behnam highlighted his agency’s activity in the crypto sphere and the need for up-to-date legislation at the Financial Industry Association Expo 2023 event in Chicago. He described the CFTC Enforcement Division’s efforts as a “nonstop drumbeat.”

In the text version of his keynote address to the industry group, Behnam recounted the $6 billion his agency collected in penalties in fiscal year 2023. He added:

“45 of those [enforcement] actions this fiscal year involved digital asset related misconduct, representing over 34% of the 131 such actions brought by the Commission since 2015.”

Behnam singled out the “precedent-setting litigation” his agency won against Ooki DAO, which resulted in the closure of the decentralized autonomous organization (DAO) and netted a $643,542 penalty. In its default judgment against Ooki DAO, the U.S. District Court for the Northern District of California found that the DAO was a “person” under the Commodity Exchange Act (CEA) of 1936.

Behnam returned to the CEA when he discussed the agency’s future direction. “The cornerstone of our latest era is disintermediation brought about by groundbreaking technology: DeFi, AI, and standard WiFi,” he said, but:

“The limits in the CEA established in essentially another era create real barriers to engaging in rulemakings and policy that is necessary to our mission, but just beyond our scope.”

Furthermore, those limits “forc[e] the agency to engage in increasingly resource intensive quests for assurances that we are acting within the bounds of our intended remit.”

I look forward to speaking Monday morning at @FIAconnect #FIAExpo on the @CFTC agenda and enforcement. My remarks will be posted online at https://t.co/JojHNdQoVh.
— Rostin Behnam (@CFTCbehnam) October 2, 2023

Vertical integration — an “outgrowth of electronification and the promise of DeFi” — is occurring throughout financial markets and leading to egulatory concerns, and “customer protections mean something different now,” according to Behnam.

Behnam’s statements contrasted sharply with Securities and Exchange Commission chair Gary Gensler’s position that Depression-era financial legislation “has been quite a benefit to investors and economic growth over the last 90 years,” and should not be tampered with.

Behnam also indirectly addressed limitations on the CFTC’s enforcement authority. “To suggest that […] we must wait until victims suffer and cry out for help to be proactive […] undermines our mission and purpose,” he said. “I have continued to advocate for additional authority in the crypto space,” he added later.

Magazine: Cleaning up crypto: How much enforcement is too much?

How blockchain technology and DeFi could help solve the housing crisis

July 5, 2023 Coin Telegraph

Coin Telegraph

Home Construction Collective’s co-founders spoke with The Agenda podcast to explain why homes are so expensive and how decentralized finance might provide an answer.

The prices of houses are sky-high all around the world, and homebuyers are feeling the pain. While affording a home has never been more difficult for many people, the ability to raise funds to construct new homes has never been easier, thanks to decentralized finance (DeFi). The newly launched Home Construction Collective is attempting to leverage blockchain’s coordination and fundraising potential in an effort to fund the construction of, and therefore increase the supply of, affordable homes.

On Episode 14 of The Agenda podcast, hosts Jonathan DeYoung and Ray Salmond speak with Home Construction Collective co-founders Isaac Lidsky and Erich Wasserman about the housing crisis and how blockchain technology may offer a solution.

Unpacking the housing crisis

According to Lidsky and Wasserman, the housing crisis is not truly a crisis of prices — instead, it’s a supply crisis. “We have systematically underproduced homes for decades,” Lidsky said. “Depending on what estimates you look at, we’re short between 4.5 million to 7 million homes today.” Exacerbating this problem is that more and more homes are being built specifically to be rented out rather than sold to prospective homeowners.

The lack of affordable homes has profoundly impacted the net worth of younger generations. “Home ownership is usually the biggest investment that people make in their lifetimes,” said Wasserman. “It’s the gateway to financial access. Homeowners have a staggering 40 times the net worth of renters.”

Lidsky added: “In their 40s, the baby boomers accounted for 21% of all wealth. In their 40s, Gen Xers, it had dropped to 2%. And for us millennials, we’re at 4.8%, with Mark Zuckerberg alone representing 2% of that 4.8%. And those are the horrendous numbers.”

Using DeFi to incentivize starter home construction

Home Construction Collective is focused on financing the construction of “starter homes,” or homes that first-time buyers can afford, which Lidsky reported are in incredibly short supply. “The more of them we can put on the market, the more affordable they’ll become,” he posited.

To help achieve this goal, the project fractionalizes the investment process, allowing people from around the world to invest in the construction of a new home and profit once it sells. Wasserman broke down the project’s mission in this regard:

“The problem we’re trying to solve and the thing we’re trying to do is to broaden investor access to these assets, which have been the, really, exclusive domain of regional banks and private lenders. And we’d submit they’ve not done a terribly good job over the last decades in keeping up with demand.”

Lidsky and Wasserman also co-founded a protocol called Rigor, which uses blockchain to streamline the construction supply chain and payment process. Lidsky said that by using Rigor, the cost of manufacturing the homes financed by Home Construction Collective is reduced:

“In the background, we’re also, at the pace of innovation in Web3, moving smartly to sort of further develop our tools ultimately to bring down the cost to produce these homes, bring down the cost in cycle times and in dollars. And so it’s a powerful one-two punch.”

To hear more from Lidsky and Wasserman’s conversation with The Agenda, listen to the full episode on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. And don’t forget to check out Cointelegraph’s full lineup of other shows!

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This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

SEC’s war on crypto: How far will it go?

April 26, 2023 Coin Telegraph

Binance USD

The latest Cointelegraph Report tries to make sense of the Security and Exchange Commission's ongoing crypto crackdown, its rationale, and the potential outcome.

The Securities and Exchange Commission (SEC), led by Chairman Gary Gensler, has been at the forefront of the United States' cryptocurrency crackdown. In the last few months, the agency has filed several enforcement actions against major crypto companies that allegedly violated security laws.

Critics say the agency has adopted a regulation-by-enforcement approach without providing a proper set of rules that fit the unique features of crypto assets. A major source of confusion is the definition of a security and whether it can apply to a highly diverse set of assets such as cryptocurrencies.

Despite being pressured in a congressional hearing last week, Gensler seems unwilling to take on the political responsibility of entering a constructive dialogue with the industry.

For many crypto companies targeted by the SEC, the choice is between entering an expensive legal battle with the regulator or shutting down operations in the US and moving overseas. Most crypto companies will likely prefer saving millions of dollars in legal expenses and opt for the latter option.

To learn more about how the SEC has waged war on crypto and the potential consequences, check out the latest Cointelegraph Report on our YouTube channel, and don't forget to subscribe!

CFTC calls ETH a commodity in Binance suit, highlighting the complexity of classification

March 27, 2023 Coin Telegraph

CFTC

The suit claims Binance used Ether as a commodity in its financial products, experts explained, which says little about the basic nature of the coin.

The United States Commodity Futures Trading Commission filed suit against Binance on March 27 for violations of the Commodities Exchange Act and CFTC regulations. Those violations included transactions with Ether (ETH), according to the suit. This claim, at first glance, touched on a notable point of contention between the CFTC and Securities and Exchange Commission.

The CFTC claimed in its suit that Binance engaged in transactions with “digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.” That was not a new position for the agency. The CFTC claimed ETH was a commodity in its suit against FTX in December, and Chair Rostin Behnam stated his opinion that ETH and stablecoins were commodities as recently as March 8 in a Senate hearing.

The CFTC position on ETH was fairly uncontroversial before the Ethereum Merge. After Ethereum moved to a proof-of-stake consensus mechanism, SEC Chair Gary Gensler commented on staking coins, saying that “from the coin’s perspective, […] that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”

Gensler’s comment brought on a slow wave of reactions. In February, for example, Ethereum co-founder and crypto entrepreneur Joseph Lubin told Cointelegraph , “Staking is not a security,” and it would be a “terrible path for the U.S.” to make it so. He added that he thought the U.S. courts would agree with him and that “there would be a tremendous outcry from not just the crypto community but different politicians and certain regulators” if ETH were classified as a security.

The CFTC case against Binance does not rest on the nature of ETH as much as the nature of Binance products, however, limiting its applicability to the larger argument.

“In this particular case, ETH is being treated as a ‘commodity’ rather than a ‘security,’” Timothy Cradle, director of regulatory affairs at Blockchain Intelligence Group, told Cointelegraph. “The complaint references securities as they relate to swaps.” Cradle added:

“The economics of an offering including ETH could still change the definition applied to the token. For example, ETH staking could still be construed as an investment contract, and as such a security.”

Some transactions, such as mixed swaps involving ETH, could be subject to regulation by both the SEC and CFTC, Cradle said, but that “would not necessarily define ETH itself as a security as mixed swaps also include commodities and currencies.”

This more complex approach to regulation would not necessarily imply cooperation between the two agencies. Yankun Guo, a partner at law firm Ice Miller, said of the situation in a statement to Cointelegraph:

“It shows that both the multifaceted nature of how tokens function and how they are used can cause them to fall under multiple agencies’ jurisdictions. […] I wouldn’t be surprised to see a similar lawsuit by the SEC naming all the same tokens except BTC as securities.”

Silver lining

The CFTC suit against Binance states that ETH is a commodity

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— sassal.eth (@sassal0x) March 27, 2023

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Indonesia to launch national crypto exchange in 2023: Report

January 4, 2023 Coin Telegraph

Coin Telegraph

The platform comes as a part of the plan to shift the regulatory oversight from the commodities agency to the securities authority.

As a part of its reform of crypto regulation, Indonesia will create a crypto exchange in 2023, according to reports. The platform is planned to be launched prior to a shift of regulatory power from commodities to securities authority.

On Jan. 4, the head of the Commodity Futures Trading Regulatory Agency of Indonesia (Bappebti), Didid Noordiatmoko, stated that a crypto exchange should be set up this year. The move comes as a part of broader financial reform launched in December 2022.

In accordance with the reform, in the next two years, the crypto oversight will be taken from Bappebti, a commodities-focused agency, by the Financial Services Authority (FSA).

The Financial Sector Development and Reinforcement bill (P2SK) was ratified by the House of Representatives of Indonesia on Dec. 15 to become the primary legal reference in the financial service sector. Explaining the shift of authority from Bappebti to the FSA, cemented by the bill, Suminto Sastrosuwito, a head of Financing and Risk Management of the national finance ministry, claimed that:

“In fact, crypto assets have become investment and financial instruments, so they need to be regulated on an equal basis with other financial and investment instruments.”

Indonesia imposed a blanket ban on crypto payments starting in 2017, while trading in digital assets has largely remained legal in the country. In the first days of January, Noordiatmoko revealed that the value of crypto transactions in the country fell by half in 2022 — from 859.4 trillion Indonesian rupiahs ($55 million) to 296.66 trillion ($19 million).

In December, Bank of Indonesia Governor Perry Warjiyo announced the release of the conceptual design of a digital rupiah — a currency the equivalent of the country’s fiat — which will be made available for public discussion.

Bitpanda aims to entice crypto investors to TradFi by adding commodities

September 8, 2022 Coin Telegraph

Coin Telegraph

The exchange now allows crypto investors access to traditional investments such as natural resource commodities like precious metals.

The Vienna-based fintech unicorn Bitpanda is harkening back to the ways of traditional finance (TradFi) through new offerings on its exchange platform.

By adding commodities to its list of available investment options, Bitpanda aims to provide its users to benefit from short-term price fluctuations in more traditional instruments, such as oil, natural gas and wheat.

Bitpanda CEO Eric Demuth told Cointelegraph that due to investor demand, the line between TradFi and decentralized finance (DeFi) is becoming more blurred every year.

“People want to be able to trade multiple asset classes simply, safely and conveniently, and TradFi is catching up to that idea."

In both financial realms, there are lessons to be learned about what benefits consumers most. TradFi is taking notes from DeFi in terms of accessibility, while DeFi has lessons to learn from traditional financial mechanisms as far as risk mitigation.

“TradFi has focused on expanding its accessibility, and that is driving a convergence. There is still some way to go before [it] can claim to have the same level of usability and accessibility offered by fintechs."

With estimates of more than 300 million crypto users as of this year, traditional and DeFi traders are most likely on the road to some middle ground.

As major institutions around the globe caught on to the crypto investment, opening up trading opportunities to assets like commodities on a digital asset exchange could also serve as a gateway to traditional instruments for crypto investors.

“Crypto investors tend to be very involved in tradable markets. They also appreciate the simplicity offered by platforms that allow them to make quick and easy investments into multiple asset classes."

Demuth says if platforms can offer the accessibility and simplicity of crypto trading, but with listings which include assets from TradFi investment possibilities widen.

Though he also stressed that in such instances an emphasis must be placed on educating about the pros and cons of each asset within the parameters of their place within the financial world.

Cryptocurrencies against the ‘silent thief.’ Can Bitcoin protect capital from inflation?

March 13, 2022 Coin Telegraph

bitcoin futures

Rising inflation forces investors to look for defensive assets. What can the cryptocurrency market offer them?

The world is becoming increasingly volatile and uncertain. The assertion that “inflation is the silent thief” is becoming less relevant. In 2021, inflation has turned into a rather loud and brazen robber. Now, inflation is at its highest in the last forty years, already exceeding 5% in Europe and reaching 7.5% in the United States. The conflict between Russia and Ukraine affects futures for gold, wheat, oil, palladium and other commodities. High inflation in the U.S. and Europe has already become a real threat to the capital of tens of thousands of private investors around the world.

Last week at the Federal Open Market Committee (FOMC) meeting, Federal Reserve Chairman Jerome Powell said that he would recommend a cautious hike in interest rates. At the same time, Powell mentioned that he expected the crisis in Eastern Europe to not only result in increased prices on oil, gas and other commodities but boost inflation, too. Powell also explicitly reaffirmed his determination to raise the rate as high as necessary, even if it will cause a recession.

Crypto to the rescue

Many investors are looking for ways to protect their savings from inflation using cryptocurrencies.

Chad Steinglass, head of trading at CrossTower, is skeptical about cryptocurrencies as a defensive asset. Steinglass commented to Cointelegraph:

“It’s important to remember that crypto is still a young asset and trades more like a speculative asset than a defensive one.”

Indeed, cryptocurrencies differ from fiat currencies in their volatility. Even the most stable cryptocurrencies, Bitcoin (BTC) and Ether (ETH), which are of great interest to institutional investors, can rise and fall by tens of percent within a day.

Of course, there are more use cases for Bitcoin each day, and it already functions as a base layer for the emerging alternative financial system. In the longer term, this trend will develop which will not only increase the price of Bitcoin, but also result in a gradual decrease in its volatility.

To protect money from inflation, investors buy gold, cash or real estate. Speaking to Cointelegraph, Paolo Ardoino, chief technology officer at crypto exchange Bitfinex, compared Bitcoin to gold:

“Crypto and Bitcoin, in particular, have unique properties and are a form of digital gold. In particular, it has shown to perform well when money is being debased by central bank stimulus methods. This, of course, is one of the original intentions of Bitcoin — to protect people from this very phenomenon.”

Jeff Mei, director of global strategy at digital asset platform Huobi Global, also shares this opinion. Mei said that Bitcoin is a great hedge against inflation because there is only 21 million Bitcoin available once they’re all mined.

Derivatives or not

Investors often use derivatives in traditional financial markets to protect savings from inflation. Rachel Lin, co-founder and chief executive officer at trading platform SynFutures, said that by using derivatives such as longing Bitcoin futures, investors could get exposure to BTC with much less capital and limit potential losses.

But, Ardoino does not recommend that investors use crypto derivatives to this end. He thinks that direct exposure to Bitcoin, which he calls “the king of crypto,” is more advisable.

In addition to Bitcoin, Mei singles out Ether as one of the most stable digital assets. He opined to Cointelegraph that Ethereum’s competitors such as Polkadot (DOT), Terra (LUNA) and Solana (SOL) could be viewed as a store of value as well.

Lin pointed out that if investors are simply looking for a way to earn fixed income, they could convert their fiat to crypto and deposit it on some of the larger centralized finance (CeFi) platforms or blue-chip decentralized finance (DeFi) protocols. Potentially, this gets a much higher return than depositing cash in a bank.

Steinglass remains skeptical about comparing cryptocurrencies to the dollar in the current situation now that the conflict in Eastern Europe caused the USD to spike in value relative to many other currencies as people scramble for stability. For the moment, demand for dollars has outstripped the fear of inflation. Steinglass added:

“On one side, cryptocurrencies are an element of an alternative money system and store of value badly needed and on the other side, they remain a risk asset in a time when investors worldwide have been reducing risk.”

Is gold the answer?

None of the experts interviewed by Cointelegraph mentioned gold-backed stablecoins such as PAX Gold (PAXG) as their preferred defensive asset. Historically, however, gold has been a traditional tool used to protect capital during times of financial turbulence. Gold constantly increases in price over time. Throughout all of 2021, the price of gold sat between $1,700 and $1,950 per ounce. It went up further to $2,050 an ounce in 2022.

Institutional investors have been showing an increased interest in gold-backed stablecoins, but the same cannot be said about the younger generation of retail investors. Perhaps the main problem with gold-backed stablecoins as a hedge against inflation is not technology but ideology. For many crypto folks, both fiat currencies and assets like gold represent old values.

It is clear that in 2022 inflation will remain a threat to investor capital, and the crypto industry has yet to find its answer to the question of combating this “silent thief.”

Commodities Investment