The U.S. watchdog for derivatives markets should create a limited pilot program for regulating cryptocurrencies, said Caroline Pham, one of the members of the Commodity Futures Trading Commission (CFTC).

“I’m recommending a time-limited CFTC pilot program to support the development of compliant digital asset markets and tokenization,” said Caroline Pham, who holds one of the Republican seats on the five-person commission, in remarks prepared for a Cato Institute event on Thursday.

After holding a roundtable to gather ideas, she said, the agency should set up a “program for a specific period of time that incorporates many of the components drawn from past pilot programs, including: registration and eligibility requirements, financial resources and other conditions, risk management, products and contract terms, and other requirements including disclosures and reporting.”

Pham, who leads the CFTC’s Global Markets Advisory Committee and established its subcommittee on digital assets, has suggested a number of crypto initiatives since she arrived at the commission, including a proposal with Hester Peirce, her counterpart at the Securities and Exchange Commission (SEC), to host joint crypto roundtables with the two regulators. But the CFTC is led by Chairman Rostin Behnam, a Democratic appointee, who hasn’t embraced an industry-friendly posture for the agency.

As a result, Commissioner Pham’s overtures toward crypto innovation may remain on the CFTC’s back burner as the industry continues to wait for Congress to establish laws to govern the sector in the U.S.

“Staying ahead of the curve requires being ready to look to the future and preparing to embrace change,” Pham said.

Most of the crypto bills moving through Congress envision the CFTC as a leading regulator for digital asset spot markets, but it’s uncertain whether any legislation will make it to the president’s desk this year or next. Many Democratic lawmakers have been critical of the industry and side with SEC Chair Gary Gensler’s view that crypto businesses should be punished under existing securities regulations.

Regulations Commodity Futures Trading Commission Pilot Derivatives Market Congress Securities and Exchange Commission

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.