Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam appears to want to use his likely future position as Bitcoin market watchdog to promote a reduction in the energy consumption of peer-to-peer (P2P) currency and encourage consumers to do so to move, find less energy-intensive alternatives.
The regulator will oversee Bitcoin if landmark Lummis-Gillibrand legislation is approved. The bill, introduced yesterday, still has to go through four Senate committees before going to the Senate for a vote.
“In terms of the relationship between the current use case [of cryptocurrencies] and the energy use in mining, I think there’s a pretty significant shift right now; and we need to remove that dislocation,” Behnam said in a live interview With The Washington Post On Wednesday.
Bitcoin’s energy consumption has been the subject of heated debate since last year, when Tesla stopped accepting payments in BTC for its electric vehicles a few months after activating the option. The automaker’s CEO, Elon Musk, tweeted at the time that the decision was due to sustainability concerns surrounding Bitcoin mining and the emissions associated with it.
Behnam pointed to two avenues the regulator could explore to advocate for a different bitcoin if given the additional powers of Lummis-Gillibrand: backboning technology and consumer behavior.
“On the one hand, we need industry to change and understand that energy consumption is too high, but we also need consumers to understand and appreciate what is at stake, so that they can use economic incentives to make their choices away from more energy -consumerism,” he said.
Lummis-Gillibrand, also known as the Responsible Financial Innovation Act, gives the CFTC exclusive jurisdiction over the spot markets of digital currencies that are classified as commodities — which would be the majority of existing coins under the current text, including Bitcoin.
As a result, bitcoin exchanges would need to register with the CFTC to provide the services they offer to US consumers today and adhere to specific rules set by the regulator in areas such as custody, customer protection, prevention of market manipulation, and information became. share.
According to Behnam’s claims, the CFTC could use its regulatory umbrella over exchanges to create an “information flow” to consumers on a variety of cryptocurrency-related topics, including energy consumption.
“And that’s kind of an age-old theory that if we create that flow of information, then incentives and disincentives will move the market in the right direction, and given the climate crisis and the issues surrounding climate change, I think that with the right and accurate disclosures.” , Incentives will dissuade people from this energy-consuming behavior.”
Climate Change: A Personal Story
Behman has a history of personally advocating climate change issues related to financial markets.
Before being named chairman in January 2021, Behman had served as the CFTC’s commissioner since September 2017 — a time when he chaired the Market Risk Advisory Committee’s (MRAC) Subcommittee on Climate-Related Market Risks.
The subcommittee’s efforts culminated in the release of the report, Managing Climate Risk in the US Financial System, in September 2020.
“The central message of this report is that US financial regulators must recognize that climate change poses serious new risks to the US financial system and should act urgently and decisively to measure, understand and address these risks,” says the summary of the report.
The report makes policy proposals related to climate change in the US, including setting a carbon price – which it says is “the most important step in addressing climate risk and promoting appropriate capital allocation”. Other suggestions include principles for developing climate risk disclosure rules, such as B. They should be “specific and complete” and “comparable between companies within a sector, industry or portfolio” to inform investor decision-making.
“Effective and well-functioning markets should allocate capital efficiently for net-zero carbon investment, drive innovation, and create and sustain quality jobs in a growing net-zero economy,” the report says. “These recommendations aim to achieve these goals by improving the functioning of markets, by removing structural barriers and by catalyzing private sector innovation.”
Homework is piling up
Given Behnam’s comments during the interview, it appears that the CFTC chairman is interested in cryptocurrency and blockchain, but lacks a basic knowledge of Bitcoin.
Not only is Bitcoin’s innovation arguably Proof-of-Work (PoW), a move to Proof-of-Stake (PoS) — considered a “greener” alternative — could undermine most of the P2P currency’s capabilities.
While it’s unclear if Behnam would follow through on his comments and drive changes on the technology side and on the consumer behavior frontlines, the community should remain vigilant and most importantly, actively work to educate regulators, legislators, and industry stakeholders about the benefits of Bitcoin and the context , in which its energy consumption should be examined.