Former CFTC Chair Calls for Swift Crypto Regulation

Timothy Massad, the former chair of the Commodity Futures Trading Commission (CFTC), has called on Congress to accelerate the development of a clear regulatory framework for cryptocurrencies. This appeal comes at a time when demands for regulation are growing, driven by the need to safeguard investors, encourage innovation, and prevent potential market disruptions.

Massad, who testified before the House Financial Services Committee, expressed concerns about the Digital Asset Market Clarity Act of 2025. He argued that the legislation could introduce more confusion than clarity, emphasizing that effective legislation should follow two key principles: "do no harm and keep it simple." Massad warned that any legislation that alters the definition of a security or modifies the Howey test to promote digital assets could jeopardize the U.S. equity and debt markets, which he described as the backbone of the U.S. economy.

Massad highlighted several issues with the Clarity Act. He noted that the Act's reliance on decentralization as a regulatory framework is unstable and difficult to define. Additionally, the Act does not address the main oversight gap it aims to solve, leaving many tokens without meaningful regulation. The lengthy and complex nature of the legislation could also create regulatory loopholes, leading to regulatory arbitrage.

As an alternative to the Clarity Act's approach, Massad proposed the establishment of a joint Self-Regulatory Organization (SRO) overseen by both the SEC and CFTC. This entity would regulate any trading platform or intermediary transacting in Bitcoin or Ether, covering all digital tokens traded on those platforms. The proposed SRO would be tightly supervised by the SEC and CFTC, governed independently, and focused on governance, customer protection, conflicts of interest, and anti-fraud measures.

Massad's proposal aims to provide comprehensive investor protection quickly by targeting the centralized platforms that dominate crypto spot markets. This approach could offer a simpler and more effective path forward for regulating digital assets, ensuring that the U.S. remains a leader in financial innovation while protecting investors from potential risks. By focusing on centralized platforms, Massad's proposal avoids the definitional chaos embedded in the Clarity Act, providing a more straightforward regulatory solution.