Crypto Industry Buying Congress and Understaffed CFTC 'Oversight'
Published: Friday, October 18, 2024
The following is from Alan Guebert, a freelance agricultural journalist from Illinois.
The Commodity Futures Trading Commission—that toy poodle of a government watchdog overseeing the world's largest agricultural and financial futures contracts—is being courted by the cryptocurrency industry as its regulator of choice over the more effective, better funded Securities Exchange Commission.
The reason is plain: The CFTC is the U.S. government's smallest, most understaffed, most underfunded regulatory agency that "doesn't have the capability, understanding or wherewithal to do its current job"—let alone take on tomorrow's trillion-dollar-plus, global crypto circus.
And it is a circus. Crypto, favored by North Korean and Russian computer hackers, terrorist organizations like Hezbollah, and fentanyl-running drug cartels, is "a solution in search of a problem," declares New York Times columnist and Nobel Prize-winning economist Paul Krugman.
Moreover, writes Gil Duran, a former editorial page editor at the Sacramento Bee and San Francisco Examiner, these wholly invented cryptocurrencies "are casinos at best and Ponzi schemes at worst." The FBI, he adds, "estimates that crypto scammers stole $5.6 billion from Americans in 2023."
This scandal-riddled industry is now financing a push to make the CFTC its lead regulator, says Duran, to give crypto the convincingly shiny veneer it needs for global acceptance.
And, says Public Citizen, a Capitol Hill watchdog, crypto is going about the change the old-fashioned way: it's spreading bushels of cash around Capitol Hill.
In 2023, crypto companies contributed less than $10 million to "super PACs over the two election cycles combined." But in 2024 alone, crypto's key players "have raised more than $200 million ... accounting for nearly half of all corporate contributions this cycle."
Taking the cash, Republicans and Democrats are now doing the industry's bidding: giving crypto oversight to weak, industry-influenced CFTC and not the more capable SEC.
On May 22, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act, on a bipartisan 279-136 vote, to make the CFTC the principal regulator of the shady crypto industry.
One key to that vote was Ag Committee Chairman Glenn Thompson whose committee maintains House oversight of the CFTC. Afterwards, SEC Chairman Gary Gensler told Reuters the bill "'would create new regulatory gaps and undermine decades of precedent' ... putting investors and capital markets at immeasurable risks."
The bill stalled in the Senate where Ag Committee Chair (and lame duck) Debbie Stabenow, has no plans to act on it.
But pressure is building. On Aug. 14, Senate Dem leader Chuck Shumer embraced crypto during a "Crypto4Harris" event by noting the industry's House bill could pass Congress by year's end—presumably in a post-election session.
That's eerily similar to action taken by a lame duck Congress after the 2000 election when it passed a CFTC "reform" bill to free government from "burdensome" regulation on newly popular financial instruments like "credit default swaps."
That industry-endorsed change—fiercely opposed by then-CFTC Chair Brookesly Born—sowed the seeds of the 2008 banking collapse, the worst financial crisis since the Great Depression.
Now comes crypto to again push a mostly incapable CFTC forward as a regulator just two years after one of its biggest players, Sam Bankman-Fried, was arrested and convicted after his "fraud-filled FTX" crypto trading platform collapsed. That mess cost crypto customers an estimated $2 trillion.
But there's more than just money at stake. Crypto creators are very open about plans to "build a cryptostate" they claim will be the "next superpower," untouchable by any nation or regulatory agency in the world.
And that's despite the fact that "There is still no real case to use them for legitimate purposes," notes Dennis Kelleher, co-founder of Better Markets, a Washington, D.C. nonprofit that monitors government finance regulation.
Other than to finance terrorists and drug cartels, build untouchable rogue empires, and undermine global markets.
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