Former CFTC chairman says crypto needs regulations now

Timothy Massad, former chairman of the Commodity Futures Trading Commission, spoke to CNBC’s Jim Cramer on Monday, and advocated for crypto regulation that won’t require waiting years for litigation to conclude.

Massad, along with former SEC chairman Jay Clayton, detailed the theory in the Wall Street Journal last week. They argued that the SEC and the CFTC should jointly create a self-regulatory organization that would come up with basic standards for asset protection, fraud prevention, conflicts of interest, as well as reporting and record-keeping requirements for any platform that trades bitcoin or ethereum.

“We strongly support enforcement of the laws, but what we’re saying is, we need more than that, and the reason is twofold,” Massad said. “One is, litigation takes a long time and, quite frankly, the crypto industry may find it’s in their interest to stretch these cases out, because they may be hoping for a change in regulatory attitude with the 2024 election. The second reason is, it won’t resolve all the issues that we need to get resolved.”

Massad stressed that these temporary restraints are necessary while litigation continues indefinitely and the definition of what constitutes a security remains opaque.

“We’re saying that’s an important question, but put that aside for a moment if you will,” Massad said, of cryptocurrency’s security status. “Let’s not get hung up on that, or rather, let’s have a parallel track which says, regardless of the classification issue, we need standards today.”

Massad emphasized that this regulatory group would be heavily supervised by both the SEC and the CFTC and would not be comprised of industry leaders setting standards for themselves. He added that this solution would be a way to get some basic industry standards in place without having to rewrite securities laws.

“Because when you get into rewriting the securities laws or the derivatives laws, you risk creating, you know, a lot of unintended consequences, a lot of loopholes that you didn’t mean to create,” Massad said. “This is a way to get investor protection standards into the industry as it exists today without having to fundamentally change the securities or the derivatives laws.”