CFTC Chairman Rostin Behnam Talks Cryptocurrencies, AI

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We do want to talk a little bit about what's going on in the regulatory space when it comes to cryptocurrencies and much more. It was a recent IMF working paper that found that crypto mining could generate about sevent tens percent of global carbon dioxide missions emissions by twenty twenty seven. We talk about crypto mining and the impact it has on the environment.

Yeah, indeed, and look, it's one of those key issues that we're thinking about as this issue, as this sector in crypto has been the focus of so much attention. It's come up repeatedly in the presidential race this year as well. It's just one of the many issues that we want to get into with the Chairman of the US Commodity Futures Training Commission at Russian benham Ross, who joins us with us here in the Plaza Hotel Russ.

Talk to us about the question.

Of environmental impact when it comes to crypto, where are we thinking about regulation of Ryan Bosch, What sort of rules are needed, what does the THEFTC have power over.

Well, before we even get to the climate impact of crypto and crypto mining, I think the larger question in the US is the regulatory structure, or really the lack of one. I've advocated for almost three years now that there's a gap in regulation, and this is just a product of the way the US regulatory.

System is set up.

Multiple agencies, couple market regulators banking regulators, and for better or for worse, we've seen a sustainability in the marketplace, sustained demand by customers, both retail and institutional, and really what we have to do is make sure that we regulate it properly so that customers are protected.

Market stability is their market resiliency.

If we can get there, and I think that would be my priority, then I think the conversations about climate impact energy usage for mining are important to ask an answer, and I think those have been actually within the domain of questions asked over the past couple of years. A couple efforts by some of the miners to co locate near power sources that are renewable or even nuclear, some other efforts to change the way mining is done to.

Reduce the carbon footprint.

But as we worked with Congress over the past couple of years to think about legislative efforts, I know this issue specifically was on their mind, and they wanted to think about disclosures, transparency, information to get to the market so that those economic incentives and preferences can essentially be manifest through decisions about what tokens to buy or not buy.

Well, and the energy component so much an important aspect of the reliability right making sure that it continues to work. I want to go back to the regulatory side. Donald Trump has kind of come out and said he's a friend of crypto. It seems like Kamala Harris's campaign is increasingly embracing towards the crypto world. In terms of your push for more oversight of the crypto world, Would you continue to do so under a Harris administration?

Yeah, and I just to be no matter who.

Yeah, and as friendly as they might be.

Yeah, to be clear, it's oversight driven by regulatory protection and customer protections. This is not me as chair of the CFTC advocating for the industry saying that crypto is going to be the next great thing.

This is about my observation as the head.

Of a market regulator, saying there is a giant gap in regulation. There are a lot of customers who are either uninformed or don't really know the associated risks with crypto, and we have to put the guardrails around this industry. And those guardrails are the same guardrails that we put around equity markets, derivatives markets, fixed income markets, et cetera. No different, no different, but we have to think about Look,

There's no doubt about that.

But if we think broadly from a principles based standpoint, the markets structure components that have been put in place for decades and have worked quite well for US markets are the same ones we need to think about for digital assets because there's a lot of questions about the

How open is the industry to regulation. I mean, it's obviously a conversation that's ongoing, and you've outlined the complexity of how the different agencies work in this front as well.

Are they engaging?

Is this something that you're actually able to see productive results that won't end open a risk of overregulation.

Yeah.

So this is really the tricky part of this because I think I argue this often the US capital markets are the best in the world because of the regulatory structure we have, because of the legal structure we have, because of the accountability there is is for bad actors and those who violate the law.

So there are many actors.

I can't speak for the entire crypto community, but there are many who have been very engaged with Washington, both in Congress and the executive branch, to see what kind of regulatory structure could work around digital assets. Will this benefit them most likely? I've said this publicly in the past. Again, to my point, US regulation is the reason in part why US capital markets are the strongest, deepest, and most liquid in the world, So they see a benefit to regulation.

The word often thrown around is legitimacy.

But again I want to pull back to what my responsibilities are, Protecting customers, protecting market resiliency and in essence sometimes financial stability. And as I continue to see this market EBB and flow and go through it's sort of organic growth, I can't help but raise a red flag and say, look, we're seeing this market grow.

We need to protect customers.

That's what would you say in terms of the powers that are necessary in order for any kind of over crypto by the CFTC to really work.

Yeah, this is a unique part, like we have two market regulators CFTC SEC.

There is a question about around some tokens.

I've articulated and advocated that bigcoin and ether are commodities under existing law.

Congress wants to change existing law. That's we still debate.

Sure, but look, we've brought a lot of enforcement cases

What is from what you're hearing from the election compaign because we ask about it, because it's coming up with alarming regularity, someone would say, in how often it's mentioned, what are you hearing that sounds like a good idea or that sounds like a bad idea in terms of where regular regulation should be going from here.

So, look, we don't want to undermine existing law. We don't want to change existing protections that exist for markets like derivatives like stocks and bonds.

We want to.

Apply what we've learned and what we have in terms of authority to regulate markets to crypto. And it's about engagement. It's about understanding what the technology is. It's understanding what new risks or new variations on existing regulatory tools we would have to apply. But I often go and I've had conversations with lawmakers in both the Senate the House.

We're still trying to figure out digital assets. We throw artificial intelligence into the mix, right increasingly, not new finance community has been using it for a long time. I do wonder if you guys are planning what tools you need to have in place to kind of oversee that aspect.

So, yeah, it's important question.

And at this point, almost nine or ten months ago, we put out an advisory, a request for comment, a consultation document, and in my mind, the steps we needed to take as an agency was one information gathering, engagement, getting better and smarter ourselves so that we can think about what existing rules apply to AI and where there may.

May be gaps in the space. So we're working through some of those comments.

I'm hopefully going to come out with some form of advisory guidance in the near future.

But it really is can hingin on us being.

Thoughtful about how AI has been used thus far and how it may be used in the future.

Are you talking to big tech about this?

We look, when we consult we are as we cast a very wide net. We want to learn from everyone, and that not only includes the individuals who are directly registered or participate in our markets, but it certainly is the tech companies who are building these AI platforms and models that are essentially being used by the financial institutions.

We're here, of course talking about climate issues, the global business form or kind of take it that into the start of it now in just over thirty minutes time, the CFTC recently product guidance on voluntary carbon credits. I'm curious about the voluntary nature of that, whether that's something that's going to be relevant and enforceable, given that that's the framing that we're given on this area.

Yeah, so not unlike crypto in some respects, we've seen voluntary carbon credit futures contracts listed over the past couple of year, derivatives and once we have futures and derivatives listed on our registered exchanges.

I use this phrase a lot we have as.

An agency of vested in in the health of the underlying market, and in this case it's a voluntary carbon market. We want to make sure there's resilience in health and high integrity in that cash market, so it's reflected in the markets we regulate. Ultimately, from a broad perspective, if we're going to transition and hit our twenty fifty targets, our one point five target, we're gonna need voluntary carbon markets. We're not gonna be able to wean ourselves off of

Twenty seconds Election betting. I know you guys don't like it. You've recently lost a court case very quickly. Nothing you'll warm up to.

It's not about what I like or don't like. It's not about what the agency likes or doesn't like. It's about what the law says, and the law in our view says that election betting is against.

The law that's found them. Thanks very much for joining us, THEFTC chair