CFTC Chair Rostin Behnam on the Fight to Regulate Crypto

Tracy Alloway (0:10)

Hello, and welcome to an episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:14)

And I'm Joe Weisenthal.

Tracy Alloway (0:16)

We are very happy to be recording a live episode in Chicago at the ISDA AGM.

There are a lot of talking points. You hear a lot of things like leverage, liquidity risk, how to properly regulate and handle trillions of dollars worth of derivatives. But there's another thing that you hear quite a bit about as well, Joe.

Joe Weisenthal (0:37)

Right, of course, nonstop talk about crypto. Obviously, crypto itself wanes and ebbs in terms of how much people are interested or paying attention.

Maybe we're still in a winter right now, but I feel like the next time there's a summer, a lot of how that market looks is gonna be based on decisions and choices that are happening today by industry participants and regulators.

Tracy Alloway (0:57)

Perhaps ironically, but not necessarily unexpectedly, when the lines on the chart go down in crypto, there does seem to be some extra regulatory attention paid to the market. So I am very pleased to say that we have the perfect guest to discuss all of this. We are going to be speaking with CFTC Chairman, Russ Benham. Russ, thank you so much for coming on Odd Lots.

Rostin Behnam (1:18)

Thanks Tracy, thanks Joe, it's good to be here.

Tracy Alloway (1:20)

I wanna start out with a very simple question that I think everyone agrees on. Who should regulate crypto?

Rostin Behnam (1:28)

Well, we have a very unique system of financial regulators in the US. I don't think that's new or something novel to either of you or the audience or the listeners as well. And I think it's been built up over decades. It's been built up as a result of crises and different instances or sort of inflection points in the financial history of the US, both monetary system and financial markets.

But because of that, we have over time developed a pretty comprehensive regulatory system where each agency, whether it's the market regulators or the prudential regulators, has a unique responsibility. And it really falls on what type of asset are they regulating? Is it a banking asset?

Is it a market sort of financial asset with trading markets and whatnot? And we have the SEC and the CFTC as the market regulators and the banking regulators, which include the Fed, OCC, FDIC. So as much as the crypto conversation presents new and novel issues and questions about the underlying asset, how to regulate it, whether to regulate it, I do think, and I've said this many times before, we have to sort of use the same playbook that we've used in the past as we think about policy that we construct for crypto.

Joe Weisenthal (2:42)

So you mentioned that people are aware of the unique nature of the US regulatory regime.

But as much as we're sort of know that, like I still have very, you know, I'm not a Washington person. I don't know how it works. Like do you and your counterparts at the other agencies, we see these headlines, right? And we'll talk about that as like the CFTC has one view and this SEC has another view on these things. Do you guys call each other up and chat? Like, how does that work? That sort of, yeah, do you guys just talk?

Tracy Alloway (3:10)

Gensler is here later.

Joe Weisenthal (3:11)

Yeah, like can we get them on stage?

Tracy Alloway (3:12)

Throwing that out there.

Joe Weisenthal (3:13)

Do you guys, yeah, do you just talk about these things?

Rostin Behnam (3:15)

We absolutely do talk. We talk within the context of a lot of the inter-agency working groups, which you're familiar with the FSOC or the president's working group. But we also do have one-on-one conversations. And a lot of these conversations that we have, and this is my perspective, of course, I can't speak for the others, is high level, sort of 30,000 feet about what we're thinking, what we're seeing, who the registrant pool is that we're starting to observe within our markets, and how we need to approach this. A lot of the work gets done at the staff level, a lot of the technical, legal work, economic work.

But we are shaping policy and we're shaping decisions as we see risks emerge, as we see new markets emerge. But communication is frequent, it's very transparent.

And I will say this, I've said this many, many times before, we have common interests across the US government in terms of what we wanna accomplish and how we wanna accomplish it.

Tracy Alloway (4:08)

Can you maybe clarify that last bit? Because there is this ongoing debate about whether or not crypto should be regulated in a meaningful way at all.