The Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission, introduced a bipartisan bill Wednesday that would grant the CFTC "exclusive jurisdiction" over cryptocurrency trades that meet commodities law.
The Digital Commodities Consumer Protection Act of 2022, sponsored by Senators Debbie Stabenow (D-Mich.), John Boozman (R-Ark.), Cory Booker (D-N.J.) and John Thune (R-S.D.), would create a definition of "digital commodity" that 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 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 the CFTC or the Securities and Exchange Commission. The bill doesn't provide that definition. The CFTC would have some ability to define digital commodities, and the bill appears to still defer to the SEC on what a security is.
Much of the bill is dedicated to detailing how digital commodity brokers would 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 has indicated that crypto exchanges listing digital securities should be treated as national securities exchanges.
The SEC, however, has moved slowly, and there is no formal rule-making in progress that would establish a registration requirement.
In the meantime, CFTC Chairman Rostin Behnam has waged a campaign to have his agency become the primary spot market regulator for the cryptocurrency markets, though Wednesday’s bill doesn't go that far.
Still, Behnam appears to have some lawmaker support on this front. Rep. Sean Maloney (D-N.Y.), a member of the House Agriculture Committee, asked Chris Brummer, a professor at Georgetown Law, 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 wouldn't grant it exclusive oversight.
The Senate committee, which introduced the latest bill, called for the CFTC to provide more guidance on digital assets earlier this year.
The committee held a hearing on the issue in February that included Behnam, as well as industry experts such as Sam Bankman-Fried, founder of the FTX crypto exchange; Perianne Boring, a crypto industry lobbyist; Sandra Ro, CEO of the Global Blockchain Business Council; and Kevin Werbach, a professor at the University of Pennsylvania's Wharton School of Business.
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, Peter Van Valkenburgh, director of research at Coin Center, cautioned that the current definition of “dealer” may be overly broad in the bill’s text.
UPDATE (Aug. 3, 2022, 15:30 UTC): Adds additional detail.
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