CFTC Commissioner Summer Mersigner discusses the inevitability of innovation and clarifies the agency’s role in bitcoin regulation.
In light of recent events, many in the Bitcoin community are looking for regulatory clarity more than ever. Questions like “who should regulate Bitcoin?” and “Will the US allow Bitcoin innovation or pursue a central bank digital currency (CBDC)?” are 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 his perspective, we started with a brief history that explored his personal interest in Bitcoin. This is critical to the conversation because before commissioners can contribute to meaningful policy in the bitcoin space, bitcoin needs to be understood.
Mersinger was with the CFTC since 2022 after being nominated by President Biden and confirmed by the US Senate. She earned her bachelor’s degree from the University of Minnesota and later earned a law degree from Columbus School of Law in Washington, DC. Since then, she has spent more than 20 years on Capitol Hill in a variety of positions. These range from working as an aide to South Dakota Senator John Thune to advocating for fintech organizations as a senior vice president at lobbying firm Smith-Free Group.
When she is off the clock, Mersinger spends time with her husband and four children; two teenage daughters and two elementary age sons. She describes herself as a big animal lover, having just been raised on a farm. She said she was always around animals, and it’s a habit she continues to this day.
Below are his thoughts on a variety of topics surrounding Bitcoin.
How did you first hear about Bitcoin and what specifically attracted you to it?
Although I can’t remember the exact moment when I first discovered Bitcoin, I can say that what attracted me was the technology involved.
The CFTC, where I work, regulates the trading of derivatives which are used for price discovery and risk management purposes. The CFTC is a technology-neutral regulator, which means that, in practice, we do not consider any technology to be better than any other technology. And yes, as regulators, we are sometimes skeptical of the new and the unknown.
But a big part of our job is to make sure that all existing and emerging technologies can compete on equal terms. Our governing law, the Commodity Exchange Act, specifically identifies one of its purposes as promoting responsible innovation and fair competition. In light of the opportunities that innovative and revolutionary blockchain technology presents for the derivatives markets we regulate, my goal is to ensure that we at the CFTC take this mission seriously.
Why do you think it is important for Bitcoin to be regulated by the CFTC as a commodity?
This is one of my favorite questions to answer, as it provides an opportunity to dispel a common misconception.
The CFTC is a market regulator of commodity futures (as well as other types of derivatives), not the commodities themselves. I often use the example of cattle markets to explain the importance of this distinction. The CFTC exercises regulatory oversight with respect to livestock futures contracts traded on our registered exchanges to provide price discovery and hedging opportunities relating to livestock in the United States. We are knowledgeable and well equipped to monitor livestock futures markets.
However, we are not knowledgeable or well equipped to monitor livestock as a commodity. Livestock auction houses and stockyards are best left to the experts of the United States Department of Agriculture.
Understanding the distinction between commodity futures markets and the underlying commodity market is key to understanding the current regulatory environment for digital assets, such as bitcoin. As it stands, like all other commodities, the CFTC regulates the trading of bitcoin futures. But the CFTC does not regulate bitcoin itself or bitcoin spot markets, which are akin to cattle auction houses and stockyards in my cattle example. Unlike my cattle example, there is currently no federal regulator of bitcoin or spot bitcoin markets.
It is true that the CFTC currently has enforcement power to prosecute allegations of fraud and manipulation in the commodity markets. With this authority, our agency has the ability to impose anti-fraud and anti-manipulation fees in the buying and selling of bitcoin. However, this power is exercised after the fact. By the time we act, the fraud and/or manipulation has already taken place. I believe that filling the void in federal oversight of digital asset markets, like bitcoin, is a task best left to the legislative process by the authority of Congress.
How do you generally respond to bitcoin scorners?
Whether you embrace or reject the usefulness of Bitcoin, it’s hard to argue against the benefits of blockchain technology. These benefits go far beyond cryptocurrencies, and whether or not you become a Bitcoin adopter, I believe the underlying technology will have a positive impact on society.
In the world of derivatives, we have seen this scenario play out before. For decades, almost all commodity futures contracts have been at the outcry. That is, traders would literally shout (hence the term “open auction”) and wildly gesture, and to consummate trades they would write them down on slips of paper. The booths were hot, noisy, and chaotic, but it was the only way to trade most CFTC-regulated products.
Today we have electronic markets. Legislative and regulatory developments a little over 20 years ago enabled electronic markets to develop alongside auction markets and competition. At first, the system in place was dominant, then the two modes of trading co-existed, and finally the most efficient technology was widely adopted.
Thus, we need only look back on our history to see that we have successfully enabled substantial technological innovations in the past, which over time have made our 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, both in Bitcoin interest and adoption, as well as in traditional finance. With a population split roughly 50/50 male/female, each sector of the economy should logically reflect an equal split. If not, there is clearly an opportunity to do better. To stay focused on the underlying blockchain technology, I am very concerned about the gender gap in science and technology. There is no reason for this discrepancy to exist and we must ask ourselves why it exists.
Again, with a mostly evenly distributed population, the imbalanced participation of one sex is most likely a symptom of a more serious underlying condition. Returning once again to the history of the “public outcry” in the derivatives markets, it took several decades before the first woman traded futures contracts in the pits in the 1960s. We can and must improve this time -this.
This is a guest post by Becca Bratcher. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
