CFTC Commissioner Summer Mersigner discusses the inevitable innovation and cleanup of the agency’s role in bitcoin regulation.
In light of recent events, many in the Bitcoin community are looking for regulatory clarity now more than ever. Questions such as “who should regulate Bitcoin?” and “Will the US allow Bitcoin innovation or pursue a central bank digital currency (CBDC)?” is at the top of the list.
To learn more about the regulatory landscape for Bitcoin-focused businesses, I sat down with Summer Mersinger, commissioner of the Commodity Futures Trading Commission (CFTC), to get her thoughts on these issues and more. To better understand her perspective, we start with a brief background that explores her personal interest in Bitcoin. This is important to the conversation because before commissioners can contribute meaningful policy to the Bitcoin space, Bitcoin needs to be understood.
Mersinger has served on the CFTC since 2022 after being appointed by President Biden and confirmed by the US Senate. He earned his bachelor’s degree from the University of Minnesota and later earned his law degree from the Columbus School of Law in Washington, DC. Since that time, he has spent more than 20 years on Capitol Hill in various positions. These range from working as an aide to South Dakota Senator John Thune, to advocacy for financial technology organizations as a senior vice president at lobbying firm Smith-Free Group.
When he is off the clock, Mersinger spends time with his wife and four children; two teenage daughters and two elementary age boys. He describes himself as a big animal lover, which comes from being raised on a farm. He said that he was always surrounded by animals, and it was a habit he continued to this day.
Below are my thoughts on various topics surrounding Bitcoin.
How did you learn about Bitcoin and what attracted you to it?
Although I can’t remember the exact moment when I first learned about Bitcoin, I can say that what really interested me was the technology.
The CFTC, where I serve, regulates trading in derivative products used for price discovery and risk management purposes. The CFTC is a technology-neutral regulator, which means that, in practice, we don’t look at any technology as better than any other. And admittedly, as regulators, we are sometimes skeptical of the new and unknown.
But a big part of our job is to make sure that all existing and emerging technologies can compete on a level playing field. Our governing law, the Commodity Exchange Act, specifically sets out as one of its goals the promotion of responsible innovation and fair competition. In light of the opportunities that innovative and groundbreaking blockchain technology presents to the derivatives market we manage, my focus is to ensure that we at the CFTC take that mission seriously.
Do you think it is important that Bitcoin is regulated by the CFTC as a commodity?
This is one of my favorite questions to answer because it gives me the opportunity to clear up a common misconception.
The CFTC is the regulator of the commodity futures market (along with other types of derivatives), not of the commodity itself. I often use the example of a bull market to explain the significance of this difference. The CFTC has regulatory oversight of cattle futures contracts traded on listed exchanges to provide price discovery and hedging opportunities on cattle in the US.
However, we are neither knowledgeable nor well equipped to monitor cattle as a commodity. The best cattle and ranch auction house for experts at the US Department of Agriculture.
Understanding the difference between the commodity futures market and the underlying commodity market is important to understanding the current regulatory environment for digital assets, such as bitcoin. As of now, like all other commodities, the CFTC regulates the trading of bitcoin futures contracts. But the CFTC does not regulate bitcoin itself or the bitcoin spot market, which is the equivalent of cattle auction houses and livestock stockyards in cattle samples. Unlike the cow example, there is currently no federal bitcoin regulator or bitcoin spot market.
Indeed the CFTC now has enforcement authority to pursue claims of fraud and manipulation in the commodity markets. With this authority, our agency has the ability to bring anti-fraud and anti-manipulation charges in buying and selling bitcoins. However, the authorization is done after the fact. When we act, fraud and/or manipulation has occurred. I believe that filling gaps in federal oversight of commodity markets for digital assets, like bitcoin, is a task best left to the legislative process through Congressional authority.
How do you usually respond to Bitcoin naysayers?
Whether you accept or reject the utility of Bitcoin, it’s hard to argue with the benefits of blockchain technology. These benefits go beyond cryptocurrencies, and regardless of whether you are a Bitcoin adopter or not, I believe the underlying technology will have a positive impact on society.
In the world of derivatives, we have seen this scenario before. For decades, almost all commodity futures trading was done through “open arguments.” That is, the trader would literally shout (hence the term “open outcry”) and gesture wildly, and to complete the trade, he would write it down on paper. Pits are hot, loud and chaotic, but this is just the way most CFTC-regulated products are traded.
Today, we have an electronic market. Legislative and regulatory changes over the past 20 years have allowed electronic markets to develop alongside open and competitive markets. First, the incumbent scheme is dominant, then the two trading methods coexist, and finally the more efficient technology gains widespread adoption.
Thus, we only have to look back at our history to see that we have successfully allowed a great deal of technological innovation in the past, which over time has made regulated derivatives markets more efficient. I believe we are approaching a similar inflection point for blockchain technology.
In your opinion, why is it important to close the gender gap in Bitcoin interest and adoption?
We need to close the gender gap everywhere, in Bitcoin interest and adoption, as well as traditional finance. With a roughly 50/50 male to female population split, every sector of the economy logically represents an even split. If not, there is clearly an opportunity to do better. Staying focused on the underlying blockchain technology, I am deeply concerned about the gender gap in science and technology. There is no reason for this gap to exist and we must ask ourselves why it is happening.
Again, with an average split population, skewed participation by one gender may be symptomatic of a more serious condition. Looking back at the history of “open outcry” in the derivatives market, it took decades before the first women traded futures on bikes in the 1960s. We can, and must, improve this time.
This is a guest post by Becca Bratcher. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.