Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam seems intent on leveraging his likely future position as a watchdog of the Bitcoin market to encourage a reduction in the energy consumption of the peer-to-peer currency. peer (P2P) and encourage consumers to find less alternative energy.
The regulatory agency will oversee Bitcoin if landmark Lummis-Gillibrand legislation is approved. The bill, which was introduced yesterday, must go through four Senate committees before being put to a vote in the Senate.
“In terms of the relationship between the current use case [of cryptocurrencies] and mining power consumption, I think there’s a pretty big dislocation right now; and we need to remove that dislocation,” Behnam said in a live interview with The Washington Post Wednesday.
Bitcoin’s power consumption has been hotly debated since last year, when Tesla stopped accepting BTC payments for its electric vehicles a few months after activating the option. The automaker’s CEO, Elon Musk, tweeted at the time that the decision stemmed from sustainability concerns related to bitcoin mining and its associated emissions.
Behnam hinted at two avenues the regulator could explore to make the case for a different bitcoin if it receives the additional powers that Lummis-Gillibrand provides: core technology and consumer behavior.
“On the one hand we need the industry to make the transition and change and understand that energy consumption is too much, but we also need consumers to understand and appreciate what’s at stake so that through to economic incentives, they can steer their choice away from more energy-consuming behavior,” he said.
Lummis-Gillibrand, also called the Responsible Financial Innovation Act, grants the CFTC exclusive jurisdiction over spot markets for digital currencies classified as commodities – which would be the majority of existing coins under the current text, including Bitcoin .
As a result, bitcoin exchanges would have to register with the CFTC to provide the services they provide today to US consumers and abide by specific rules established by the regulator in areas such as custody, customer protection , prevention of market manipulation and information. share.
According to Behnam’s claims, the CFTC could leverage its regulatory umbrella on exchanges to create “a flow of information” to consumers on a myriad of cryptocurrency-related topics, including energy consumption.
“And it’s sort of an age-old theory that if we create this flow of information, the incentives and the disincentives will move the market in the right direction, and given the climate crisis and the issues around climate change, I think with the right and correct information, the incentives will keep people away from this energy-consuming behavior.
Climate change: a personal story
Behman has been personally involved in advocacy on climate change issues in the context of financial markets in the past.
Before being named chairman in January 2021, Behman had served as CFTC commissioner since September 2017 — a period during which he led the climate-related market risk sub-committee of the market risk advisory committee (RMCA).
The efforts of the subcommittee resulted in the publication of the “Managing climate risk in the US financial system” report in September 2020.
“The central message of this report is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they must act urgently and decisively to measure, understand, and address those risks.” , indicates the summary of the report. .
The report makes policy suggestions regarding climate change in the United States, including putting a price on carbon – which it says is “the single most important step in managing climate risk and drive the appropriate allocation of capital”. Other suggestions include principles for developing rules on climate risk disclosure, such as making them “specific and comprehensive” and “comparable across companies in a sector, industry or portfolio” for inform investors’ decisions.
“Efficient and well-functioning markets should allocate capital efficiently to net-zero investments, drive innovation, and create and sustain quality jobs in a growing net-zero economy,” the report says. “These recommendations seek to achieve these goals by improving the functioning of markets by reducing structural barriers and catalyzing private sector innovation.”
homework is piling up
Considering Behnam’s comments during the interview, it seems that the CFTC Chairman is interested in cryptocurrency and blockchain, but lacks fundamental knowledge about Bitcoin.
Not only is bitcoin’s innovation arguably proof-of-work (PoW), but a change to proof-of-stake (PoS) – seen as a “greener” alternative – could undermine most of the functionality of the P2P currency.
While it’s unclear whether Behnam would follow up on his comments and push for changes on the technology and consumer behavior fronts, the community must remain vigilant and, most importantly, active in educating regulators, legislators and stakeholders. from the industry on the advantages of Bitcoin and the the context in which its energy consumption must be studied.