A rift within the regulatory landscape for cryptocurrencies emerged this week, with CFTC Commissioner Caroline Pham raising concerns about the agency’s recent charges against cryptocurrency exchange KuCoin. Caroline claims that the regulator might be violating the rights of its sister agency in this particular case.
On March 26, the U.S. Department of Justice and the CFTC jointly filed charges against KuCoin for allegedly operating as an unlawful digital asset derivatives exchange.
According to commodities regulations, the agency’s lawsuit “appears to assert that fund shares held by investors—namely, securities—can themselves constitute leveraged trading,” CFTC Commissioner Pham stated in a statement on Friday.
Nevertheless, “this interpretation fails to distinguish between an investment in a fund, which would typically be a security under the jurisdiction of the SEC, and the trading activities of a fund, alleged here to be under the CFTC’s jurisdiction,” Pham stated.
“The CFTC’s approach may infringe upon the SEC’s authority and undermine decades of robust investor protection laws by conflating a financial instrument with a financial activity, disrupting the foundations of securities markets. Owning shares is not the same thing as trading derivatives,” Pham added.
Concerns over the jurisdiction of the SEC and CFTC over the cryptocurrency business have been raised on multiple occasions in the last year.
The SEC and CFTC are at odds over Ether’s classification as a security or commodity. SEC Chair Gary Gensler suggests many cryptocurrencies are securities, while the CFTC views ether as a commodity, as seen in recent charges against KuCoin.
Earlier this month, at a congressional hearing, CFTC Chair Rostin Behnam warned legislators that if the SEC were to classify ether as a security, the registrants of the CFTC that offer ether as a futures product would violate SEC regulations. She described the situation as “critical.”
Also Read: CFTC Sues KuCoin Over Illegal Crypto Trading
