The Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC), introduced a bill Wednesday which would grant that agency "exclusive jurisdiction" over cryptocurrency trades that meet commodities law.
The Digital Commodities Consumer Protection Act of 2022 would create a definition of "digital commodity," which would include cryptocurrencies like Bitcoin and Ether but not anything that may be a security, giving the CFTC the ability to oversee both digital commodity transactions and force registration of digital commodity platforms, according to a section-by-section breakdown of the bill.
The crypto industry's top priority in Washington has been pushing for either a federal agency or Congress to create a clear definition of “digital commodity” or a digital security, which could give companies greater clarity on when and how they must register with an agency like the CFTC or the Securities and Exchange Commission (SEC). The bill does not provide this definition; while the CFTC will have some ability to define digital commodities, the bill appears to still defer to the SEC on what a security is.
Much of the bill is dedicated to detailing how these digital commodity brokers will be treated similarly to their traditional finance counterparts.
At present, most crypto exchanges are regulated at the state level, with no clear federal guidelines for registration or oversight. The SEC, the CFTC’s counterpart, has indicated that crypto exchanges listing digital securities should be treated as national securities exchanges.
However, the SEC has moved slowly, and there is no formal rulemaking in progress that would establish this type of registration requirement.
The CFTC’s chief, Chair Rostin Behnam, has in the meantime waged a campaign to have his agency become the primary spot market regulator for the cryptocurrency markets, though Wednesday’s bill does not go that far.
Still, Behnam appears to have some lawmaker support on this front. Rep. Sean Maloney, a member of the House Agriculture Committee, asked law professor Chris Brummer in June whether the CFTC should “have direct statutory authority to regulate cash markets.”
House Agriculture Committee Republicans have introduced the Digital Commodity Exchange Act, which would also grant the CFTC greater jurisdiction over crypto spot markets, though that too would not grant it exclusive oversight.
The committee also held a hearing on the issue in February with Behnam, as well as industry experts such as FTX founder Sam Bankman-Fried, Chamber of Digital Commerce founder Perianne Boring, Global Blockchain Business Council CEO Sandra Ro and University of Pennsylvania Professor Kevin Werbach.
Coin Center, an industry think tank, published a blog post supporting the bill, saying it would give the CFTC the authority to oversee spot markets rather than have the SEC oversee non-securities exchanges.
However, Coin Center Director of Research Peter Van Valkenburgh cautioned that the current definition of “dealer” may be overly broad in the bill’s text.
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