It’s been just two weeks since the approval of bitcoin ETFs by the SEC. But concern is still being voiced from many corners, not least from other regulators.

Speaking at the ABA Business Law Section Derivatives & Futures Law Committee, CFTC Chair Rostin Behnam said the widespread acceptance of bitcoin and its popularity with investors means the SEC bitcoin ETF approval was “a natural next step in the development of markets for digital assets”.

“The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action.”

Rostin Behnam, Chair, CFTC

“The CME, CBOE Futures Exchange, and the Cantor Exchange would not have self-certified derivatives products with bitcoin as the underlying asset if there had not been significant interest in the products,” Behnam said.

But he argued for more concrete legislation at the federal level: “I fear that the regulatory approval of bitcoin ETPs [(exchange-traded products)] introduces risk that, in spite of yellow flags, market participants, retail and institutional alike, may mistake the technical approval of a product with actual regulatory oversight of the cash commodity digital assets. 

“The concerns I have publicly voiced for the better part of six years regarding the digital asset commodity spot market have only become magnified. The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action.”

“[The approval of spot bitcoin ETPs] does not approve or endorse crypto trading platforms or intermediaries, which, for the most part, are non-compliant with the federal securities laws and often have conflicts of interest.”

Gary Gensler, Chair, SEC

The SEC made clear that despite the ETF approval, it did not “endorse” crypto trading platforms or intermediaries. These are mostly non-compliant with the federal securities laws and often have conflicts of interest, it said.

“While the ETPs are achieving legal certainty and therefore a means to market themselves to the masses, there remains nothing firmly in place to address the opaque and inconsistent practices in the cash markets for digital assets around issues such as trade settlement, conflicts of interest, data reporting, cybersecurity, customer protections, transparency, and general market integrity. Instead, the ETPs have taken a speculative and volatile asset, wrapped it in a thin layer of indirect regulation, and packaged it as a shiny new product,” he said.

Behnam concluded his speech with a broad message on the need for regulators to strike a balance between meeting the needs of the market and avoiding making snap decisions under pressure: “I began these remarks with some thoughts on how regulators must avoid meeting urgency with hyperbole to get an instant win. While ad hoc decisions made under duress can miss the mark when it comes to providing clarity and preserving market integrity, so too can waiting until pristine conditions prevail.”