Rostin Behnam went on to argue that stablecoins should also be treated as commodities — flying in the face of the SEC, which has threatened to take action against Paxos.
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SEC chairman Gary Gensler has made it clear that he believes Ether is a security — especially following last year's switch to a Proof-of-Stake consensus mechanism.
But in the latest sign of growing tensions between U.S. regulators who are grappling for oversight of the crypto sector, CFTC chairman Rostin Behnam has indicated that he disagrees.
Speaking to U.S. politicians on the Senate Agriculture Committee, Behnam maintained that the world's second-largest cryptocurrency should still be regarded as a commodity — meaning that it would fall under his agency's purview.
Behnam said that the Commodity Futures Trading Commission had considered "very deeply and thoughtfully" about whether Ether futures should be treated as commodities or securities — and that it stood by the decision that had been made.
"We would not have allowed the product — in this case the Ether futures product — to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset because we have litigation risk, we have agency credibility risk if we do something like that without serious legal defense or defenses to support our argument that that asset is a commodity."
He went on to argue that stablecoins should also be treated as commodities — flying in the face of the SEC, which has threatened to take action against Paxos over the issuance of BUSD amid allegations it's an unregistered security.
Behnam pointed to how the CFTC had taken action against Tether back in 2021, which resulted in a $41 million penalty.
At the time, his agency had found that the stablecoin issuer had made "untrue or misleading statements" related to the backing of USDT. Tether had claimed that the asset was 100% backed by dollars, even though this wasn't true most of the time. Behnam told the committee:
"Examining the circumstances around the Tether case, it was clear to our enforcement team and the commission that the Tether stablecoin was a commodity, and that we needed to move forward, and swiftly, to police that market."
Some in the crypto space have reacted with alarm to the Securities and Exchange Commission's recent approach — amid claims it amounts to regulation through enforcement. There have also been complaints that there isn't a clear rule book for crypto regulation in the U.S. — and this uncertainty is driving businesses offshore.
Coinbase's CEO Brian Armstrong recently warned that this would be harmful for the U.S., as it means it would fall behind in the race for financial innovation and cede ground to other global superpowers. He pointed to how China has become a dominant force in 5G technology and semiconductors as an example, and argued that crypto policy should be regarded "as a matter of national security."
Many crypto executives have said that they would welcome regulation because it would lend credibility to the space, encourage institutional investment and foster innovation.
