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tv   Conversation With Outgoing CFTC Chair  CSPAN  January 13, 2025 1:49am-2:56am EST

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futures. and when you talk about the future regulation for futures, you are really looking out in the forward and we are here joined by chairman behnam, the 15th chairman of the commodity futures trading commission on going to introduce them in the second but i just want to underscore to folks that you may think of this as abstract financial regulation and its
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finest, greatest, futures, commodity. on one hand you may say this is stuff that moves markets and walter but doesn't affect my life or is a stuff we used to read about when you're looking at cotton futures and how farmers dealt with that. that history is incredibly important to understanding why the cftc exists, white and independent agency, why the united states alone among major global powers in the world separates our regulation of capital markets between commodities and futures and stocks and bonds. everyone else is one capital markets regulator. we have two. this comes comes from unique role of agriculture in american society and its regulation. i wanted something different to you. everybody who flew home for christmas or thanksgiving flew in part because a commodity and the future. businesses all around the world
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that we depend on the provide services need to understand their cause of goods in the future. markets need to understand pricing in the future, or at least consensus best estimate of future pricing to understand their business decisions. our economy depends upon information about what is going to happen in the future, and those markets are incredibly important in translating into day-to-day activity. making our life better and more fulfilling a locus to buy that plane ticket and allowed the company to know how much the gas is going to cost when you hit the runway. those markets while they're in kobe important are easily overlooked. if the net regulated well, they can be manipulated. i don't need to tell folks in this room or anybody who decided to do need to spend their morning thinking about the future financial markets and future regulation the problems that occur in market manipulation and why we need tough and strong regulation that that's what chairman behnam has
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done such a fantastic job as a 15th chairman of the cftc. served as commissioner since 2017. he will tell you quite a bit about his role but i just want to highlight three things because in washington people are often policies to come to financial regulation. three things that chairman prioritize during his tenure, the first ever had the first visual intelligence, the first data scientist and the first diversity officer, chief diversity officer, to give you an inkling into the concept some thoughts that molded this organization to tackle the challenges that behold our markets and our society today and in the future. he also had the privilege of serving as vice chairman of the international organization of securities commissioners because markets are global. if you're not interacting on a global basis you're missing the picture. in addition while he has been fantastic and stronger to do
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roots having worked in the state of new jersey, a state i hold a great respect, he has seen the wisdom and beauty of maryland and resides in a great state of maryland in baltimore with his wife and children. so from one marylanders born and bred to another, who has come here let me say welcome you to the stage of workings and thank you for service and were excited to hear what's in store. [applause] >> that's a hard act to follow. i do want to thank everyone who is here. i know a lot of folks are listening virtually, but it's a cold snowy in washington. i knew who would be a low attendance but it's a good crowd here and looking forward to his remarks. thank you again, erin and brookings for hosting. today as an mention will make final networks as cftc chairman. chairman. i think it's order to fully process and articulate and a salient way with the last seven years have made for me. i can say without hesitation i approach every part of the job
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with the utmost focus and care. always prioritized above all those are critical oversight, enforcement duties and protecting customers, and supporting reliable and resilient markets. with that are largely static budget i've insisted would builder expertise and support necessary investment in technology, infrastructure and template upscaling so we can continue to proficiently fulfill all of our responsibilities. by design exchange traded include derivative market structure has proven that only resulted but a beak of the challenging times. in 2010 the derivatives model provided a path forward for prices and served as a blueprint for swaps market reform. more than a decade later treasury futures clearing is following suit. looking back almost 15 years organic growth and historic markets, the introduction of new products including the digital commodity asset class and significant expansion market participants both institutional and retail through technology
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have not been met with calls for wholesale or even moderate regulatory reform. rather, ongoing success has been achieved by those who recognize we are stewards charged with building a solid foundation and not laying waste to what was never broken. as kevin i've always made it my priority to always adjust cftc regulatory enforcement initiatives to meet the matter at him. in my seven years alone we've moved through a pandemic, whether corsican made it to market disruptions, realized technological revolution, welcome in the rise of climate finance, migrated to the cloud, rocha and crowned with mediation, , manage multiple crypto cycles, surfaced scandals and exercise agency an opportunity towards improving governance, margin and clearing. we have accomplished a lot more and they're still much more to do, always more to do. i'm going to resist the urge to reminisce too much. however i do want to take a
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moment to tell you reflect on the issues and accomplishment i believe benchmark my time at the commission and will continue their own trajectory in the years to come. one of my earliest efforts as a sponsor of the cftc's market risk advisory committee focus on interest rates benchmark reform. encouraged by the broad market participation in global cooperative and consultative efforts towards transitioning away from libor, contribute the work of interest rate benchmark subcommittee which promoted libor transition through various initiatives that the successful transition away from libor has resulted in safer and more reliable and stable financial markets. it addressed climate related market subcommittee risk which released report in september of 2020 called managing climate risk in u.s. financial system. this this is a first of its d among the u.s. government entity. among the 50 through recommendation to mitigate risk to financial markets pose by climate change, the climate risk
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report identified pricing carbon as a fundamental element for financial markets to efficiently allocate capital to reduce greenhouse gas emission. in courage by the tremendous support for the climate risk report and cognizant of the cftc's focus on risk mitigation and price discovery put us on the front lines of the nexus between financial markets and decarbonization i established the cftc's climate risk unit shortly after becoming chairman which led to the commission to finalizing a guidance regarding the listing of voluntary contracts in september of 2024. since the first bitcoin futures contract and binder option self certified in 2017 i have urge for greater action to provide legal insurgency with respect to rapidly developing fintech products like cryptocurrencies. there have been a few targeted efforts but overall the digital asset market has continued to integrate into traditional financial institutions with a
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comprehensive regulatory guard rails concerns regarding customer protections, increasing instances of fraud and market abuse, broader market resides and even financial stability are intensifying in the absence of federal legislation. we have seen this before in our history where the large swaths of financial outside of oversight responsibility and we've seen time and time again that it ends badly. american investors small and large have demonstrated egret is to incorporate digital assets into their portfolios. it's order to ensure when they do so the full protections afforded by oversight are in place and that illegal and illicit conduct is swiftly addressed. for the cftc whose role is yet to be determined the crypto area has highlighted the need for our rule set to address the derivative industries current course it as more entities seek to move away from the traditional familiar models which have evolved over decades and wasted countless shocks towards structures that combined
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unique activities around increasingly novel products, new questions are ultimately arise. issues regarding integration, decentralization raise important questions about topics of interest, the strength of capital margin and segregation requirements and the role and responsibility of self regulatory organizations. building confidence supporting integrity, promoting innovation and fostering evolution all comes down to data. indeed the singer most important lesson we learned from the financial crisis and the foundational premises of the dodd-frank act is that markets are interconnected. the common language that ties invite participants actresses and practicalities to all we endeavor to achieve is a data. focusing on my time as chairman of the division of data was a relatively new division that had been created from the cftc's i.t. department and market oversight. dod had a couple dozen talented and hard-working staff but with
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dodd-frank priorities wrapping up and host of new opportunities it lacked a a strong vision to leverage its capability to benefit the agencies data analytics foundation. we made several strategic dod leadership hires to ignite the potential agencies analytics capabilities for years to. soon after i brought in a new chief data officer and dod director we hired cftc's first chief data scientist who leads the development of new analytic services and tools for use across the agency. the chief data scientist due to good upskilling step to enhance their analytics in ai capabilities. in the past year 300 of our approximate 700 employees have taken a day decides programming or cloud-based raining. we are laying the foundation for sophisticated analytics program that staff from across the agency can leverage to inform policy, , conceived ongoing oversight, and enhance enforcement capabilities.
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this work is charting all the typical data pain points and optimizing opportunities along the data lifecycle. the ai vision i often spoke about in 2023 is well on his way to realization. last month cftc staff issued an advisory on the use of ai by cftc registered entity and registrants. the advisory vote in month-long effort by the staff, by staff task force to engage with market participants. ai technology providers, domestic and international regulators and other stakeholders to understand existing and potential ai use cases and risk in the derivatives market. turning to the more routine business as usual agency duties come in early 2023 outlined a commission agenda for the years 23 and 24 to consider and vote on roughly 30 regulatory and policy matters in addition to any outstanding proposals from the prior year. i bracketed to the agenda into
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themes enhancing risk management and resilience, strengthening customer protections, promoting efficiency and innovation, improving reporting and data policy, addressing duplicative regulatory requirements, and edifying international comity. the themes reflected over decades of testing a fitness of the post crisis reforms has punctuated by the recent perfect storm that culminated in branding 2022 as a historically challenging your across all commodity complex. there were some more fine-tuning to do and when you're to address several of the stopgap measures in place that fell short of providing the binding assurance of commission action. and there were a few issues emerged amid the storm clouds and innovative flash the required us to consider the need for regulatory intervention. in all we complete roughly two-thirds of initial items on my list and a significant progress on the rest that should provide a strong foundation for future completion. i don't think any chairman or
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commission and has the time and the tailwind to complete all their endeavors and indeed it is our nature as stewards to leave some business unfinished for our successors. no remarks of the cftc could be complete without a discussion of our enforcement program. we accomplish our mission through through a three color system of effective self-regulation, direct oversight, and a strong enforcement program. early in my tenure i shared my philosophy on enforcement and relationships between the regulator and the regulated. highlighting recent enforcement trends i focus on the needs to check in on one another to build trust and to work on relationships. cooperation and transparency was key to ensuring that went newcomers enter the derivatives market we bring them into the regulatory fold and the community. i was cautious because there were risks that increasingly automated environment may be providing a false sense of supervision and monitoring for risky behaviors. we needed to engage directly
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building regulatory structures that would absorb and foster, limit and amplify mistakes, reckless behavior and outright misconduct with enforcement as the consequence and not the instigator. my philosophy remains the same, and i'm constantly reminded as a regulator the derivatives industry relationships, cooperation and coordination remains our highest priorities. and though some may disagree i believe that our enforcement program executes its mission with utmost commitment towards holding individuals and institutions accountable, deterring bad actors and promoting confidence in u.s. derivatives markets which continue to be the premier mechanism for global price discovery and risk management. as i've said threat by tenure at the commission, the best principal space rules and world will not succeed absent clear guidance from regulators, adequate means to measure and ensure compliance and willingness to enforce compliance and punish those who
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fail to ensure compliance of the rules. as chairman i kept my word to not push forth a proposal, policy practice, procedure or enforcement recommendation that did anything else. i delivered my first prepared remarks as a commission in november 2017 at georgetown university. i vividly remember walking through campus on the crisp autumn evening in washington feeling a bit nervous about my first speech which focus on the ports of cftc markets, the lingering and backs global financial crisis, and the critical role derivatives markets plate and the global economy. in many respects not much has changed. in other respects so much has changed. with globally traded commodities, investment and all manner of transaction executed, cleared and price off cftc regulated entities in u.s. dollars, cftc derivative markets are critical to our nation's net economy and long-term national security. this position cannot be taken
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for granted. for those of us entrusted to support and safeguard this privilege beyond our tendency for decades to come, we must act with an eye toward anyone or anything that may undermine this supremacy. geopolitical stress is increasingly need to be vigilant. macroeconomic waters remain choppy as inflation lingers as a threat. perhaps even more so is influx of new entrants with the voracious desire for contracts in anything and everything that may entice a growing cohort of speculators eager to participate and fearful of missing out. innovation has changed the modern methods of derivatives trading at our regular changes bear little resumes to those that existed even 50 years ago when the commission first chairman accepted his appointment. their primary function as a means for hedging and price discovery remains paramount and continues to rely upon a fluctuating mix of speculators at the forefront of forecasting changes as a note of commodity
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and pure gamblers playing the odd for the thrill of the pria. their symbiotic relationship always across legitimate dispute its of no month the line between the two is increasingly indistinct. what matters is the proposition that when derivatives trading occurs on an organized fiction subject to strictly enforce rules and oversight, and with a system of effective self-regulation, there should be no mistaking experience for gaming, gambling or anything less than a bustling throes of commerce. i say this now because there's much to distract the cftc from what is important, from what we are charged with doing good today technology is driving change in the financial markets faster than it ever has. products and structure are evolving that only to meet demand from a growing customer base that is diverse in terms of geography, sophistication and objectives but also to attract participants from the broader population whose interest is piqued by the promise of financial inclusion and
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prosperity made possible by the tech driven ease of access to regulated markets. to that end we increasingly find ourselves poised to make decisions that blow pass our historical roots in agricultural markets and leave levers e threshold of increasing expansion, transformation and sometimes gamification of the derivatives markets. change continues to push markets and regulators into areas ripe for exploration. it's exciting. there are some changes in the rhythm but the motorcycles, scenery and people keep us grounded as we advanced towards creating greater efficiencies,, heightening protections, proving risk management and welcoming new players. also designing new products and ultimately building new structures. of course however swiftly we navigate we can never do so without caution, deliberation and maneuvering around a fair share of unseasonable condition. fortunately as we've seen time and time again we have the
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wisdom of the past as we forge our future. i'm stepping down as chairman at noon january 20 and a look for to working with president trump's team in support of an orderly transition between now and inauguration. as under any public saving yesterday my friend that cftc will be shortly thereafter on friday february 7. meeting demands for actors in which is me and transparency required to respond to market participants and we can do that effectively if we are preoccupied with falling into a spiral of uncertainty or sealing the gates of government from fear of public engagement. i hope my successors trust in states, trust one another and trust the process, the cycle of the season, as they bring a someplace new but always with a nod to where we have been. thank you very much. [applause] >> is well, mr. chairman, thank
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you for those remarks and it's an honor and a privilege to sit and reflect for a moment forward talk about the future on what you accomplish. you described having achieved two-thirds of your stated objectives which i i want to y is pretty impressive because one thing that really has always stayed with me, when i was a young staffer in the senate where i know you spent some time as well, i worked for the great senator from maryland, senator pulsar baines who had been the head democrat and recommend on the banking committee for six years when i joined and the senate was 50-50 of the time and a lot of people were speculating senator strom thurmond had died, the control would change and we spent a whole brainstorm session for months coming up with our agenda. sure enough senate flipped inmate senator jim jeffords let them we became congressional corley called the largest ideological swing of any committee in the senate from conservative phil gramm to
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liberal pulsar baines of maryland. we had a 12 page thoughtful agenda. senator sarbanes was a rhodes called an agenda and and yet 12 pages of what is going to accomplish in this chairmanship that he been waiting secures four. you can google search the document that you not find the word accounting, which is probably what it is best known for. why? accounting was one of the top issues expected to confront america in may of 2001. you all know that you also not find or terrorism. the unexpected. i want you to talk for a second about what it is on that to third list that you did accomplish that you're so proud that you were focused on but also reflect for a second on the unexpected things that were not on your list when you started, but now you look back on saint
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weimer, we rose to that child. >> again, it's great to be here and reflect folded on the path. seven years but three half years as chair. the unique position i had an think this is fairly unique, relatives of the chairs is as you mention i was a commissioner since 2017 appointed by trump early on in that administration and confirmed in 2017. it was a minority commissioner for 3+ years. as you pointed out also i worked in the senate as counsel for six and half years with one of my response goes after dodd-frank to oversee title vii of the bill which was derivative title. seeing the agency evolve over 15 critical years everything about today, but to 2010, 2008 of the changes that went through, i mentioned this in my repair remarks have futures model, exchange traded models served or
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structures or as a model for swaps reform. some of you know in the audience and probably listening, too, we're going through and treasury market reforms to clear those products as well. i can that model survey as a basis for it. as i thought about what might agenda would be, i reflected on agency and were independent, where it was today, what it had been able to resist in terms of market volatility and challenges and this was certainly covid and massive commodity price fluctuations in the spring of 2020, the physical commodities but also the financial complexes like interest rates and ethics and credit as well. seeing that resides in the cleared space, a year later we saw the invasion of ukraine by russia and again a direct impact on commodity prices. so as i thought about the agenda when i got confirmed as
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department chair in 22 it was what do we need to do to strengthen our markets but not also undermine what the proven to be which was quite resilient and quite effective. we worked around as i mentioned in my prepared remarks and has a customer protections, enhancing risk management, focusing on cyber and data policy in ai, focus on governance issues and topics of interest, again ares i mentioned in the speech, which didn't necessarily require major market reforms or market structural reforms because the market structure sound. it was really surveying my directors, leadership team as he reckoned with tighten up the rules that are otherwise any slightly weaker than we want and to strengthen markets and build consensus with both the commission of the stakeholder community so that we can get this done. my thought in 2022 when president biden puts me is acting, very cautious about being aggressive in the first 21 year because i was still trying
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to become the permanent shared very difficult and dicey political position because you want to get that spot but you've got to be careful -- >> at the big difference between acting and confirmed. >> big-time. my staff is here at their huge is responsible for my success over the past couple of years, but very much remember those first-come having the privilege and honor to be acting was a huge success on january 21, 2021, having that responsibility but ultimately i was trying to get the permanent position and it wasn't appointed until september 2021. so quite a bit of time. a little longer than typical for cftc chair. >> by the need occ. >> that's true. >> washington joke. president biden never confirmed a comptroller of the currency and as for your. >> but we have great acting comptroller. we are lucky to have them. but point being is your indisposition and it is, in fact, acting and you have to respect that. you have to respect that title and understand that you're not
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in the position necessarily push policy may change because you truly are a steward. we are always the steward permit or acting but when you're acting you truly are a steward and with got to be cautious. i get the not find in september, i get confirmed in late december of 21, sworn in probably literally to the day if not close to the day three years ago, four years ago. we roll into 2022 and we start rolling out the agenda. i start in the rulemaking process which is very laborious, very time-consuming, very resource consuming and you've got to go through it. you have to do it very proscriptively and methodically because if you don't you're violating the law. ultimately, as 20222 emerge and this is the second part of your question, you knew crypto and digital assets are going to be an issue, right? we knew this going back bae essential when we brought our first case. but women have futures contract
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lifted which i mentioned in my prepared remarks in 2017, it really put the agency on the map in terms of the regulated federal market agency that was overseeing a crypto type of financial contractor albeit a a futures contract but still a regulated futures contract. with that and with come to think about the ebbs and flows of the crypto cycle over the past ten years, as we got into 2017 we start have a bit of a price burst up to 20, 25,000 and then you started to see an escalation close to 60, 70,000. >> this is bitcoin. >> right. sorry, to clarify that. ultimately one of the unexpected things was dealing with the ftx implosion of the late 2022 and also many folks don't know this but they had an application before us as a regular and entity that was very, very novel in its market structure proposal and went to deal with it if we were very and deliberative about
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it, asking for comment. that was a congressional hearing called an house. so it it consumed a lot of time. and the crypto market continued to grow. we brought a lot of cases in 2022 come opposite ftx imploded but in the savior when a number of failures and hedge fund space and crypto space. so i started to really come to your point, create an issue and a set of issues that you don't plan for. i ended up testifying and number of times over the past four years specific on crypto, crypto legislation. i enjoyed it. it was a moment where you wanted to demonstrate to the larger public for the agency is capable of. what we were observing as a frontline regulator and cop on to be. this is enforcement cases i talk about but ultimately again to answer your question, you have this agenda, put it into a silo, you ask your staff to give movie audit cost they focus even though it you read the daily news clip from the cftc as we discussed you probably saw the
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past 24 hours everything tends to be about the hot sexy issue which in this case is crypto, prediction markets and other things. it is difficult. you expected. i talk to my predecessors to get a pfister we all know it. you and your former boss dealt with the 25 years ago, but you can plant as much as you want but ultimately you are going to deal with so many crises and issues whether geopolitical wars, covid, returning to work and some of the domestic things you have to do with agency that i do think the key way to succeed is to get the agenda done to make sure that you can assent to multitask the key 51 focus on task at hand and do things in multiple streams. ultimately i think getting that two-thirds number, crisis or none, still and to consummate because you always will do with headwinds and barriers but we were able to do with a lot of different issues unexpected, many not expected and in the end very proud of what we are able to come out with. >> let's dig into the digital asset situation because there's
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something you said i want to quote to you from your prepared remarks from you said that you stand with the cftc to fill this gap. as a regulatory gap that's been created by digital assets in crypto who come to video which agency you are of what side you can argue, really don't fit nicely into this 20th century distinction between security and commodity, between future and asset. and washington has been abuzz with different legislative proposals, outgoing former chairman now mchenry had a bill on stablecoin. cftc, the sec, the federal reserve have all been involved in regulatory turf debates but who's in charge who should be in charge, who is currently in charge should be in charge, who they can convince congress to put in charge.
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and you said in your prepared remarks you think the cftc should fill this gap and your prepared both, you said during your tenure, and you said and there, and after, that you're going to be an advocate for the cftc. why? why should the cftc, which is generally viewed, you can tell me i'm wrong in fact, but she kept on a wrong instead of the opinion that cftc is viewed as a smaller, more junior agency certainly to the federal reserve and the sec. why should the cftc fill this gap? >> i want to adjust better we are certainly smaller, like quantitative come its map, there's a a reason we have a thousand people. appropriators come congressional appropriate and authorizers. ask any american taxpayer would expect give us the money we need and that's the money dasha will lodge within 10% range of what i think my budget request is but we should expect congress to give us any more money than we need. we have a very large regulated
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market we oversee but we have generally the right number of people and it is concurrent with the number of registrants we have. du jour, totally take issue with that characterization. we have responsibility. we have a number of experts in the derivative industry which is likely the most complex and complicated financial market among many financial markets. we have our role. you said in your remarks the u.s. is very unique. we have a patchwork of regulators and it is because of history going back with the cftc in 1922, the federal reserve in 1913, the adhesive 33-34, fdic -- yada, yada, yada. we all know the story. upon what is it is unique. we have the biggest markets in the world and each part or segment of the market had essentially a dedicated regular. i know this frustrates a lot of people, a lot of policy
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discussions of merging different agencies even in the past couple weeks but from the prodigious side of the market site. >> alt-right i think it's a net positive. i think we need dedicated regulars for markets that are exponential bigger than any other market across the globe and as you pointed out in your remarks, so critical to everyday americans whether it's food on the table, fuel for home, traveling come interest rates for student loans and mortgages, et cetera the idea we would fold agencies within each other whenever such important mandates and responsibilities i think is a little careless that we should think very hard about doing that before we -- >> what should we do? i been digital assets are exploding, right? >> digital assets is a unique situation where you have a legacy statute both commodity exchange act, securities act of 33 and 34 that address different parts of the market securities and commodities. these technologies who acetabular to focus on bitcoin
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that is technically under current law defined as a commodity. we are derivatives regulator. we only focus on a specific part of the financial market, not the actual physical commodity itself but if financial contract that sits on top of the commodity. so we find yourself over the past four years in a situation where between two market regulators there's a gap. not a huge surprise when you have multiple regulators is like arbitrage but we have a gap. this is where and what i've been called on congress to fill this gap and to define the tokens in the way that one of the regulars come at that conference to be the regulator, to be able to have the authority to oversee and regulate this new financial asset. >> do you think their specific parts of that filling the gap that need, that congress, that your successors need to be focused on both in terms of fixing something or managing the world in which they haven't
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fixed something? because it's not like stocks that are just being randomly listed or going on. i'm getting text message all the time from random people about hock to weekly party sound like jokes until you look at the dollar amounts get invested in these things and they are real. they're out there. people are today did with that. >> that's the point. i think i've tried to make over the past couple years because in this four-year cycle of ebbs and flows and peaks and troughs, there have been moments where the naysayers and the cynics have said oh, i was right. this stuff should just go away and the idea of legitimizing it through federal regulation is absolutely preposterous. why would you do that? a u.s. federal agency over farc calling. coin. why would we do that? but in essence this market has persisted. it is at its arguable peak right
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now. there is large-scale adoption by traditional financial institutions and many retail investors. and proof is in the enforcement actions both cftc and sec have been bringing for the better part of a decade. i think as as a regular and s chairman of the agency in this binary choice, i say this often between legitimizing at the asset class that is relatively new and perhaps questionable by some verses leaving u.s. and american investors vulnerable to fraud, manipulation and losing their net worth, i take legitimizing it and protecting u.s. investors all day long. because one, i think that's what are responsible, our core responsibility is as a regulator and the government is, but also we've seen this in history. when you have regulation and you have too shy to let a something that is otherwise in the dark,
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opaque, the sort of cream will emerge and come to the topic everything else will kind of go away. and i think among hundreds if not thousands of tokens that probably exists, if there are going to be some or many that persist in time and are traded as commodity or securities, regulation will expose and prove that. >> let's talk a little more than about that scene because you discussed about allowable contractor. i think the quote i had was the light is increasingly indistinct between what ought to be allowable and what isn't. you talk about the gamification, and i'm old enough to remember at one point we didn't have gambling other than in atlantic city and las vegas. and now we have it in our pocket. you know, you can abetting almost anything on your phone at any time. and the gamification, these
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contracts have popped up. i mean, you talked about, the law says you're not allowed to do anything that's quote day become the cftc is supposed to stop gaming and the public interest, incorporate the reader contract out there about what was going to happen to one of the worst marylanders i can think of, luigi man gianni, the person allegedly assassinated the ceo. people start speculate and writing contracts on his extradition. are we going to become a society where people are waging on whatever horrific act occurs on the television? how is a cftc going to stop that within the existing statute, or should they, , should we be in that situation where the public is betting on everything. >> in addition to gaining and public interest that sort of series of prohibited contracts or financial products includes war assassination, terrorism,
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anything goes against the public interest and also if you think is illegal under federal or state law. paraphrase a bit but that's generally -- >> and was it onions? >> yes. >> box office movie futures. >> those are no longer issue because someone tried to quarter the onion market in the '60s and as you remember well box office futures from dodd-frank. also olive oil by the way. >> some of these things you like specific carveouts and others feel like conceptual situations. how do you handle that? >> very difficult because what you're speaking of our derivatives called contracts that are essentially payouts based on events occurring were not occurring. their issue to to these markets in the been around for quite some time. you could be a commercial end-user come some who relies on power production or power consumption and need to know what the temperatures on any
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given day or over a time of months. there are then contracts of what the federal reserve will do in terms of interest rates and fomc in terms what we'll do at its next meeting. but as he said and as you noted light is becoming increasingly blurred because the statute we have identified a series of events that are prohibited, but we have because of phones and access to markets, all things like i mentioned in my remarks, we have new cohort of market users who really want to bet on everything and anything. political elections is one thing that is. i've spoken about that a lot. we're in the middle of the negations, there was a physical decision in the d.c. circuit, d.c. dish the in september that ruled against the cftc upset at this point these concerts are permissible. fine, uncollared respect that decision. >> you fought against betting on election come against contracts on election futures, and the judge, not being in the public interest, this specific judge
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said no, no, no, you know, everybody wants to know who's going to win and seeing futures on who's going to win is permissible. >> more technical than your sort of synopsis speed i'm an economist not a lawyer, forgiving. >> essentially not a gaming and these are permissible. so you can now bet on elections on regulated markets. you mentioned this contract about man gianni. and again the country was listed for a while and then was pulled but my point is as every day goes by, it is very important i think for my successor to think about the origins of the agency and the origins and the reasons for the product that exist. you mentioned this, our markets date back to the 19th century of the 1850s in chicago, chicago board of trade where your trading agriculture futures so farmers could manage risk. that has ballooned and expand
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into a variety of commodities that are extremely important to everyday life, , what can intert rates, credit, effects or any other number of financial interest on top of agriculture and energy, metals and other commodities. it is fight and have no huge opposition to us but it's a different direction. when need innovate, evolve this is my thesis on crypto but awfully the our social issues we have have to consider and contemplate as this his context are too areas that are not clearly delineated in statute and would and could have a negative impact in terms of incentives and disincentives for market users. one of my cases for the elections why i oppose is against the law, think my trepidation that the law is it is gaming and is against the public interest. i've also made a case if we do have these contracts as we do now, if there's an allegation of fraud or manipulation in the contract or an election, the cft
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district cftc would have to be pulled into the allegation of fraud or manipulation whether it's a voting box, whether it's a social media is about a candidate doing something or not doing something. because if there is an action at the underlying level with i canned and will potential impact the price on a cftc market-driven obligation to investigate that pixie can think figure extradition of a criminal allegation or any other think around sports and gambling. again, we are of the same era where i remember driving down the court garden state parkway to go to atlantic city, everything is accessible by phones and the thing we have to rethink collectively as an executive branch, as congress, as a society where do we want regulated markets to exist and what we want traded on them first what do we want in the gimmicks they are. >> when i i ran for the maryld house of delegates for the first question people sit out i know you're serious? how do i think you're going to win? if i could've spent a little bit bit of my fundraising money
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boosting a tiny trading contract to show me as the front runner that what event the best campaign finance decision i could've made in a pretty thin market. the public interest to me. this judge operable to peer i want to talk with the future of regulation because you regulated mostly in an era where the supreme court had a case called chevron which gave deference to agency regulators and very famously this most recent supreme court overturned that precedent in the case called bright so i guess moved from a post chevron world to a local bright world and cftc and the future is going to have to adapt. how do you think, what advice do you have for your successors for how to adapt in a world where the judiciary is going to feel a lot more empowered to define the public interest relative to the five commissioners appointed by the president, confirmed by the
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senate with 1000 present writer body of deep experts in all this in december going to get the judge in whatever case, whatever place in gone. what's that going to do? >> it makes you think about your first question as i thought about my agenda. i'm an attorney by trade, what time in congress and use it as a council and then came as commissioner. you knew with a new alignment of judges and the trump administration that chevron and 84 supreme court case would certainly be challenged. most likely overturned which it was with loper bright. this really is giving less deference is really the key word to the executive branch and independent agencies to write rule if there is a sort of the gap between what the statute proscriptively says and what an agency does from a contract perspective it as i thought about my agenda this was top of might. what have you do and ever it you have to realize the our risks on the sort of spectrum and that curve. one of biggest risk this litigation risk.
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along that curve you have all these resources you are expending to write rules propose, get comments finalized and blessing you want to do is write this rule that you spent years on and then it gets a challenge in court and you lose your like okay, what was at four? ultimately i'll say this about financial markets and financial market regulars and specific about the cftc given my role here. we are principal space regular. embedded within the statute, and exchange act. i testified in the senate in july, senator ernst has been huge advocate for this case and i speak about that and positive way. i think she's let a caucus on loper bright and asked important, thoughtful questions. we did a fair amount of work at the agency to be responsive to her and other senators who wanted to know what are you doing about this case and how is it affecting agency and what have you done that might fly in
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the face of loper bright? in the end we conclude that because we are principles-based regular and much of the statute is built around deference to the agency, chevron deference has not come up on too many if any occasions. so on one hand i feel like we are in a generally say position as the independent agency as a financial market by glitter that has a principles-based regulatory structure. that is extremely important because as working with digital assets and other new products markets evolve overnight. congress and agencies cannot keep up with markets at the clip they go. it is so important for the agencies to have as much authority and deference to be able to adapt to evolving markets. this is a net positive that only for the agency but also investors, customers and in the market itself. we need to adapt as a marketing is because they benefit from a strong comprehensive regulatory structure. >> all that said, regardless of
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the deference of what i view as relative principal base regulatory structure that gives us the authority i would pass on to my successor as you think about your rule set, your agenda, everything should be thought about through the lens of loper bright. as much as i think there is an opportunity for the agency to take action independently, if a market participant, stakeholder, whoever it is has issue with the rule, loper bright will give that entity, institution, individual a pretty strong standing to make a case that if it is not a direct byproduct, the rule of putting direct byproduct byproduct of the statute, the words, the prescriptive words of the statute, it could be challenged and there's a decent chance there will be success the agency would be overturned. >> so let me ask you one question before turning to the audits or because you talk about the future of the market.
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and you've had this international background and this experience, , and the dollr is so important, right? one of the recent cdc and the sec and the u.s. markets are so important is dollar hegemon. the dollars place of the world reserve currency, and i think it's pretty well agreed we need to protect that. on the other hand, part of protecting that status is loan for innovation at another part of that is protecting the integrity of our market. another former boss of mine senator chris dodd, chairman chris dodd would say to me, you know, one of the reasons i believe the dollar will always be the world hegemony is nobody's ever lost sleep thinking about that our markets are not being -- the financial crisis rattled that one reason why we need to come back strong with dodd-frank to reassure the world that our markets were, in fact, the most protected, while
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allowing for that innovation can how do you handle the ballots and what did you learn from your time to what do you think the future of regulation should be as this clip of innovation seems to be moving on an exponential curve? >> so i couldn't agree one or more with senator dodd and to think that's absolutely right that markets to u.s. markets are the most liquid, transparent, deepest and desired in world because of regulation. there's a husband issue around the margin of what's right or wrong. fixing the regression here her but ultimately the competence of regular structure perhaps multi-regulatory landscape is the reason that u.s. markets are the pesco partly the best in the world and most desired in the world. on the hegemony point, i've actually call you said this, right, commodity markets are priced in dollars. this is oil, wti, right? is is in all our agriculture
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complexes, corn, beans, wheat, everything in between, the metals complexes as well. this is extremely, extremely speedy and bitcoin. >> and bitcoin. >> the future -- >> there's an argument to be made about the health of the treasury markets and the treasury departments ability to issue debt because of stablecoin and then again, or tied to the u.s. dollar. >> tethered to the u.s. dollar. >> point being is over my four years with the pandemic and then the invasion of ukraine by russia and the middle east, either the issues of the past couple years, we've seen some transactions that this should not be a surprise, of energy products, oil in non-u.s. fiat, right? i think about evolving and building futures markets the
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globe, some adversaries, some allies, and what does it mean for the fact that we have the largest derivatives exchanges that price these core commodities that are essential to use the economy? and what if these core commodities start to be price in non-u.s. fiats? that changes leverage for trade. that changes leverage from a national security perspective, as a set in my prepared remarks. this is not something that will happen anytime soon. i have thought about it with some my staff as well as we look out deep out the curve because her to think about that i think as policymakers, as citizens, as regulators what is going to happen in 20, 30, 40, 50 years if this shift actually does happen and what does it mean for u.s. dominance i think from economic standpoint but also from a national security standpoint? if you look at our budget, right, in a conus would say any amount of money we spend and collect it doesn't quite make
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sense that invest would allocate capital to the u.s. government. but we still maintain and manage to raise debt without a problem at a pretty healthy interest rate because of the conference in the u.s. and being backed by the u.s. government. we need to maintain that, and part of that is the commodity markets being traded here that priced in dollars. there's no doubt in my mind as the element of our economy and our country is constantly being tried to be poked or attacker undermined, this is probably one area. again it will be very far out the curve but i've mentioned this and numerous speeches the past four years. we've done some thoughtful work at the agency, but it is an area we have to, we cannot take for granted, that's a phrase i use my prepared remarks, we have to think about in the long run. whether it's agriculture exports, whether it's energy exports or energy independence, and then obviously having the dollar reserve currency status, these are all key components of
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our success as a country both economically but also from a national security perspective. >> question from the audience? >> michael with "wall street journal." dave michaels with "wall street journal." the crypto market seems to think at the moment that fdc is likely to stand down from trying to regulate that market through enforcement of the securities laws and rules that are there today. that's kind of been the theme of crypto regulation for the past several years. i'm curious, chairman, how do you think about the next six o 12 months, 18 months of the crypto market, of digital assets? is a going to be a a kind of free-for-all where regulators are not really come cftc or sec are not really trying to apply
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current laws or rules other n dealing with anti-fraud authorities that they have? and at what point do you see a regulatory framework kind of passed by congress that the regulators like our agency or cftc are going to implement? and kind of a second, a related question. you talked about litigation with risks and you guys pass rules, right? you said if rules are then end up living, what was the point of doing that? there is way to think about what's going on -- sued into oblivion -- for tacc than your agency with the enforcement actions because the commission, that commissions under oppression under pressure loudest and have of all those losses. i think it's natural to ask what was the point of all that? what did we get from all this, all this litigation, all this enforcement says the report in 2017? could you address that? what good you think came of
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seven, eight years of hard-core enforcement. >> well, i'm going to speak for the ctc and power perspective and obviously news you cover, dave, and others in the press. i said this earlier, the enforcement action and some of the fraudulent conduct speaks for itself. i think what what we seen e past decade merit action by enforcement agencies, and criminal authorities which we've worked with justice on a number of locations. what the problem is i think in part is there are multiple interpretation of existing law. there have been a number of court decisions over the past, call it seven years, that a clearly delineated bitcoin for sure in my view and others and also ether as commodities. whether it is a debate and if they get open. i have confidence but there's a
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debate about the other literally hundreds of other tokens and how we are to classify them and begin a 100-year-old securities test or just interpretation of what we get as a commodity or a security. this leaves the market in a place where it's unsure where it can participate and play and at least the regulated in a position where it wants to maintain number one mission responsible of customer protection in doing what it can to ensure that you don't have fraud and manipulation leading the folks losing money. and the legislation all get to your question. i said this in my statement there been a number of effort i've been a part of in congress over the past couple of years both. [cheers and applause] can become jen thompson in the ag committee, senators
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