SEC Approach Is ‘Threatening the Entire Ecosystem’: Former CFTC Commissioner

By André Beganski

Brian Quintenz said he understands why the crypto industry isn’t happy with the Securities and Exchange Commission (SEC)—but doesn’t see regulation itself as the problem.

The former CFTC (Commodity Futures Trading Commission) commissioner said the regulatory environment for crypto is cumbersome in its current form, and in an interview at Mainnet 2022, he told Decrypt why some are looking towards the CFTC for a different approach. 

“I think what the crypto ecosystem wants is rules that fit its technology, that are fit for purpose, that allow for the innovation to actually reach its full potential,” Quintenz said. “You’re not getting that out of the SEC.”

During his tenure at the CFTC, he oversaw the listing of Bitcoin futures contracts in the U.S. and the creation of tokenized commodities, among other crypto-specific developments, according to a statement he published at the end of his term. 

Quintenz now works as an advisory partner on the crypto team at venture capital firm Andreessen Horowitz. “They reached out to me after I left the agency because they knew that policy, regulation, legislation was going to be a major focus of the crypto ecosystem and how to protect it,” he said.

According to Quintenz, some regulatory agencies have taken an approach to crypto that’s been more resistant to change, rather than paving the way for new technology to become adopted. “If the SEC was serious, it could do things that allowed for a kind of securities-like regulatory structure to exist, without threatening the entire ecosystem," he said.

He said labeling cryptocurrencies as securities raises some issues in terms of how entities could comply with existing rules, “imposing obligations on parties that have no way to meet those obligations.”

For example, he said calling something a security would mean that there’s a central issuer, which would be required to send proxy statements to everyone that holds a given token. He asked, “How does that even work?”

The rigidness of the SEC has essentially left it up to congress to come up with a new framework, Quintenz said, one of the only ways he thinks the CFTC could gain oversight of spot crypto trading. Part of his efforts has been working with elected officials to educate them on the potential benefits of a better-regulated crypto space.

“The more informed a member of Congress or a senator is about crypto, the more rational, reasonable, productive, and positive their framework is going to be for crypto because they understand the potential innovation [and] future benefits of people owning their own participation in networks and what that means.”

He also pushed back against the idea held by some that any form of regulation regarding crypto would be bad for the industry. Quintenz posited the idea that regulation could eventually change the space for the better.

“There could be a perception around some corners that regulation in and of itself is bad – that it’s confining, it’s constraining, it’s just costly,” he said. “Some of those things are true, but if you have well-tailored, appropriately-calibrated legislation, the ultimate result could be … large, liquid markets with very strong integrity.”

The benefits that could come from a regulatory framework are better than what the industry is currently confronting, according to him, and would better align resources that parties have to devote to staying compliant.

“If it’s done the right way, there are huge benefits to that,” he said. “And they certainly outweigh, in my view, the potential costs to anyone necessarily involved, as long as it doesn’t criminalize or overly-penalize certain activities that are based off of a very ambiguous standard that a regulator has not clarified.”

Editor's note: This story initially referred to Quintenz as former head of the CFTC; the error has been corrected.

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