Following the recent passage of a bill in the U.S. House of Representatives that grants more power and funding to the Commodity Futures Trading Commission (CFTC) for overseeing cryptocurrency, Senator Dick Durbin (D-Ill.) raised concerns about whether the agency is equipped to handle this new responsibility.

"Some worry the CFTC is 'biting off a hell of a lot more than they can chew,'" Durbin stated. During a Senate Appropriations subcommittee hearing on Thursday, Durbin questioned CFTC Chair Rostin Behnam, asking, "What in the world makes you think that you can get into this fast-moving, capacious world and be effective as a regulator?"

Behnam acknowledged a regulatory gap over "non-security commodity tokens" but defended the CFTC's enforcement actions against crypto entities. "We are adequately equipped to oversee the markets we are mandated to oversee, but if we were to be given authority over crypto markets, I would certainly expect there to be an increase in a budget," Behnam said.

SEC Chair Gary Gensler, who previously chaired the CFTC, was also present at the hearing and offered his perspective on the issue. Gensler noted that the CFTC does not have a "disclosure-based regime" similar to the SEC's. "It's a great agency, but it was set up to do derivatives," Gensler said.

The U.S. House recently passed the Financial Innovation and Technology for the 21st Century Act (FIT21), a crypto market structure bill that assigns new jurisdiction to the CFTC over "digital commodities" while designating the SEC to oversee "digital assets offered as part of an investment contract." The bill received bipartisan support, including votes from 71 Democrats and former Speaker of the House Nancy Pelosi.

However, House Financial Services Committee Ranking Democrat Maxine Waters has argued that FIT21 could stretch the CFTC's resources thin, potentially weakening its enforcement capabilities. The SEC has about 4,500 staff members, while the CFTC has only around 700 employees, according to a fiscal year 2024 budget document.

There is currently no companion bill for FIT21 in the Senate, and top Democratic lawmakers have shown limited interest. Meanwhile, Senate Agriculture Chair Debbie Stabenow (D-Mich.) has been in discussions with Senate Majority Leader Chuck Schumer about her bill, which would split crypto oversight between the SEC and CFTC.

Senator Bill Hagerty (R-Tenn.) also criticized the SEC's approach to crypto regulation during the hearing, suggesting that the lack of clear rules is driving the industry offshore. He pointed to the collapse of the crypto exchange FTX, arguing that it chose to avoid the U.S. market due to regulatory uncertainties. "Crypto exchanges have a difficult time registering in the U.S.," Hagerty said.

Gensler rebutted this claim, asserting that the problem lies with the exchanges' unwillingness to comply with U.S. laws. "With all respect, that's because they are choosing to try to not comply with U.S. law that so well protects our capital markets," Gensler responded.

As the debate continues, the passage of FIT21 underscores the ongoing challenge of balancing effective regulation with the rapid growth of the crypto industry. Lawmakers and regulators must navigate these complexities to ensure both innovation and consumer protection in the evolving digital asset landscape.