Climate-Advocate CFTC Chair Wants To Change Bitcoin

Climate-Advocate CFTC Chair Wants To Change Bitcoin thumbnail

Commodity Futures Trading Commission Chair Rostin Bennam seems to want to use its likely future position as watchdog for the Bitcoin market to encourage a decrease in the currency’s energy consumption and encourage consumers to choose less-energy-intensive options.

The regulating agency will oversee Bitcoin if the Lummis-Gillibrand landmark legislation gets approved. Yesterday’s bill needs to pass through four Senate committees before it can be voted on the Senate floor.

“In terms the relationship between the current usage case [of cryptocurrencies], and the energy consumption form mining, I think there is a pretty significant dislocation at the moment; and we need that dislocation to be removed,” Behnam stated in a live interview with The Washington Post Wednesday.

Bitcoin’s energy consumption has been debated fiercely since last year when Tesla stopped accepting payments in BTC for its electric vehicles a couple of months after enabling the option. The car maker’s CEO, Elon Musk, tweeted at the time that the decision arose from sustainability concerns in relation to bitcoin mining and its associated emissions.

Behnam suggested two avenues the regulatory body could pursue to support a different Bitcoin, if it was granted the additional powers under Lummis–Gillibrand: backboning technology or consumer behavior.

“On one hand, we need the industry’s transition and change to understand that energy consumption is too high. But we also need consumers understand and appreciate the stakes so that they can choose to avoid more energy-consumptive behaviors through economic incentives.” he stated.

Lummis-Gillibrand, also called the Responsible Financial Innovation Act, grants the CFTC with exclusive jurisdiction over the spot markets of digital currencies classified as commodities – which would be the majority of existing coins per the current text, including Bitcoin.

Bitcoin exchanges will need to register with CFTC in order to provide the same services that they offer today to U.S. customers. They also have to abide by specific rules by the regulator in areas like custody, customer protection, market manipulation prevention and information-sharing. According to Behnam, the CFTC could use its regulatory authority over exchanges to create an “information flow” to consumers about a variety of topics related to cryptocurrencies including energy usage.

“And that is sort of an age-old theory that if we create that information flow, incentives and disincentives will move the market in the right direction, and given the climate crisis and the issues around climate change, I think that with the right and accurate disclosures, incentives will move people away from that energy-consuming behavior.”

Climate Change: A Personal History

Behman has been personally involved in advocacy about climate change-related issues in the context of financial markets in the past.

Before he was named chairman in January 2021, Behman served as a commissioner for the CFTC since September 2017 – a time during which he spearheaded the climate-related market risk subcommittee of the market risk advisory committee (MRAC).

The subcommittee’s efforts culminated in the release of the “Managing Climate Risk in the U.S. Financial System” report in September 2020. The report’s executive summary stated that the central message was that U.S. financial regulators need to recognize that climate change presents serious emerging risks to the U.S. Financial System .

The report offers policy recommendations regarding climate change in the U.S.

“Effective and well-functioning markets should allocate capital efficiently to net-zero emissions investments, spur innovation, and create and preserve quality jobs in a growing net-zero economy,” the report reads. “These recommendations seek to meet these goals by improving the functioning of markets by reducing structural barriers and catalyzing private sector innovation.”

Homework Is Piling Up

Given Behnam’s comments during the interview, it seems the CFTC chairman is interested in cryptocurrency and blockchain but lacks foundational knowledge about Bitcoin.

Not only is Bitcoin’s innovation arguably proof-of-work (PoW), a change to proof-of-stake (PoS) – deemed as a “greener” alternative – could undermine most of the P2P currency’s features.

While it is unclear whether Behnam would follow suit on his comments and push changes on the technological side and on the consumer behavior front, the community should remain vigilant and, above all, active in educating regulators, lawmakers and industry players on the benefits of Bitcoin and the context in which its energy usage should be studied.

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