Rostin Behnam, chair of the Commodity Futures Trading Commission (CFTC) has called the current mechanism of obtaining Proof of work cryptocurrencies such as Bitcoin “skewed”.
Speaking on May 18 at the POLITICO’s Sustainability Summit, the top regulator noted that Bitcoin’s mining model was neither environmentally friendly nor sustainable, stating that BTC’s economic output was being overshadowed by its colossal energy usage.
“There is a clear dislocation between the usage and generation that’s needed to mine these coins and the sort of economic output that we’re seeing from digital assets themselves. That may rebalance over time, but right now it’s clearly skewed.” Behnam, who is serving his first term as chair of CFTC stated when asked about cryptocurrencies in the context of environmental sustainability.
With the advent of digital assets, the CFTC has been seen as primary to the regulation of the nascent sector given that it is involved with regulating the U.S. derivatives markets. Together with the Securities and Exchange Commission (SEC), the agency is likely to receive express authority to steer the digital assets regulatory space once Congress passes legislation for the crypto industry.
The regulator went on to tout the Proof-of-Stake (PoS) consensus mechanism, suggesting that it was high time Bitcoin developers started considering a shift from the Proof of work (POW) model.
“I would give credit to a lot of folks in the industry – not all but many – who are starting to recognize this issue and starting to think about different ways of mining. You may be familiar with these terms ‘proof-of-work’ vs. ‘proof-of-stake’ and these are just methods of mining coins…proof-of-work becomes a lot more energy intensive than proof-of-stake and a lot of these coders are starting to work toward proof of stake,” said Behnam.
According to him, one of the ways of pushing the digital assets industry to PoS was to introduce regulations requiring firms to disclose how much energy a coin was consuming. This would help investors in selecting coins with better environmental incentives, prompting the industry to strive for PoS networks.
Behnam comment’s come two days after he told CNBC that the CFTC was “working hard towards putting together legislative proposals” on digital assets pursuant to President Biden’s March Executive order, which also touched on energy usage.
During the interview, he also addressed the lack of understanding between the CFTC and the SEC on which digital assets were commodities or securities, stating that the two agencies were working with regulators to make the definition clear. Whereas to the CFTC, Bitcoin, Ethereum, and other cryptocurrencies are commodities, the SEC has held that they are securities.