President Biden's move to nominate two CFTC commissioners to other roles could shake up crypto policy at regulator: TD Cowen

President Joe Biden's move to nominate two Democratic Commodity Futures Trading Commission heads could influence how the agency approaches crypto in the future, according to investment bank TD Cowen. 

Last week, Biden tapped CFTC Commissioner Christy Goldsmith Romero to lead the Federal Deposit Insurance Corporation and Kristin Johnson to become Assistant Secretary for Financial Institutions at the Treasury Department. Both commissioners have pushed the agency to issue rules or guidance to protect consumers and address conflicts of interest in crypto.

If Romero and Johnson secure their roles, the CFTC would be left with Democratic Chair Rostin Behnam and Republican Commissioners Caroline Pham and Summer Mersinger, leaving the GOP with the majority.

Given the change, the Biden administration will move quickly to fill the two spots, said TD Cowen in a note on Monday. However, replacements likely wouldn't be confirmed until the fall. 

"In the short term, this could end up being positive for crypto as CFTC Chair Rostin Behnam has been one of the stronger crypto advocates that President Biden has nominated," TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in the note. 

Behnam has urged Washington lawmakers to pass legislation regulating the crypto industry. The U.S. House passed a Republican-led Financial Innovation and Technology for the 21st Century Act, also known as FIT21, in May, though it is unlikely to become law this year. The Senate has no companion bill and has shown less interest in crypto bills than the House. 

The bill gives the CFTC new jurisdiction over "digital commodities" and asserts the SEC would oversee "digital assets offered as part of an investment contract." Behnam has said his agency could implement a regulatory frame within a year if FIT 21 were to become law. 

President Biden's nomination of Johnson and Romero could also bring some risks if Biden is re-elected in the fall, TD Cowen said.  

"[T]his does set up some CFTC risk for crypto going forward, especially if President Biden wins a second term," Seiberg added. "Given the administration's skeptical views of crypto, it is likely that new nominees will be crypto skeptics. They could pressure Behnam to soften his crypto support."

The Trump card

However, if Republican presidential candidate Donald Trump wins in November, the former president will name a new CFTC chair, Seiberg said. 

Trump has taken a friendly stance toward crypto over recent weeks and has begun accepting crypto donations. He also recently said he would advocate for bitcoin miners. Meanwhile, Biden's re-election campaign has begun reaching out to crypto industry players, according to previous reporting from The Block. 

"We believe Trump is likely to name a crypto advocate to the post, which would be positive for moving crypto market structure legislation next year," Seiberg said.