CFTC Eyes Potential Oversight of Cryptocurrencies, Carbon Trading

According to CFTC Commissioner Summer Mersinger, cryptocurrency innovators and US politicians are leaning toward placing the Commodity Futures Trading 

According to CFTC Commissioner Summer Mersinger, cryptocurrency innovators and US politicians are leaning toward placing the Commodity Futures Trading Commission in charge of regulating digital currencies.

The CFTC's mission to supervise agricultural, energy, and financial options markets would be expanded, paving the path for the agency to regulate additional digital assets like non-fungible tokens, or NFTs.

Separately, the CFTC is looking at how carbon trading markets work in order to see whether they may be used for hedging and risk management.

Mersinger was speaking on the sidelines of the Reuters Commodities Trading USA conference in Houston on Tuesday. He is one of five commissioners on the independent board that governs commodities and financial futures markets.

Major crypto firms have endorsed the CFTC, and U.S. senators Cynthia Lummis, R-Wyoming, and Kirsten Gillibrand, D-New York, submitted a measure on Tuesday that would make the CFTC the industry's primary regulator.

"The industry is coalescing behind the CFTC as the major regulator," Mersinger added.

Although lawmakers have yet to select which agency would govern cryptocurrencies, the Lummis-Gillibrand bill provides a starting point for discussion in Congress.

The CFTC has started its own investigation into a possible role in cryptocurrency regulation, with officials examining for possibilities in sectors like spot-market crypto trading "where we may have some extended policy making," according to Mersinger. She emphasized that the government has never regulated spot markets before, and that its investigations are preliminary.

"We're still a powerful regulator," she continued, "but our registrants have a lot of freedom." "They've been extremely interested in that method against some other financial authorities' top-down approach," she added.

Another area in which the CFTC is interested is carbon trading. Its regulation is currently mostly enforced by industry groupings, with participants' participation being entirely optional.

Mersinger said, "We have an interest in that sector, but we don't govern it." She went on to say that one thing to think about is what modifications could be required for the voluntary markets to function well.

The CFTC published an advice warning of the dangers in 2020, when U.S. oil futures prices fell negative for the first time on worries of a shortage of physical storage amid decreasing demand, which she said not enough people took seriously.

She said that one of the lessons learnt was the necessity for more inter-agency coordination and negotiation of contract settlement conditions with exchanges and traders.

"At the end of the day," she added, "storage wasn't as big a problem" as she had thought, but it had been poorly conveyed.