On Thursday, a member of the House of Representatives presented a new bill supporting an existing Senate initiative to make the Commodity Futures Trading Commission (CFTC) the primary cryptocurrency regulator for the United States.
The Bill
The Digital Commodities Consumer Protection Act of 2022 focuses on establishing the CFTC as the leading agency to oversee the trading of digital assets and exercise exclusive authority over cryptocurrency spot markets.
The Act has bipartisan support and was introduced in early August by leaders of the Senate Agriculture Committee, Chairwoman Debbie Stabenow (D-Mich.) and senior Republican John Boozman (R-Ark.).
Rep. Stabenow stated in a committee hearing that one in five Americans have used or traded digital assets—but these markets lack the transparency and accountability consumers expect from our financial system. Too often, this puts Americans’ hard-earned money at risk.
The legislation includes a provision that directs the Commission to produce a Report on Historically Underserved Customers participating in Digital Commodity markets. The report would seek to identify any impact crypto has had on communities typically excluded from the financial system.
The Democratic Congressional Campaign Committee and Rep. Sean Patrick Maloney (D-NY), who chairs the Commodity Exchanges, Energy and Credit Subcommittee, have since joined.
In the Senate Committee hearing, industry experts gave testimony on two panels. The first panel included Chairman Behnam alone. The second panel was composed of the Director of Financial Regulation and Corporate Governance from the Center for American Progress, the Deputy General Counsel from Coinbase, the Chief Legal Officer from Citadel Securities, the CEO from the Crypto Council for Innovation, and the CEO from Stellar Development Foundation.
The CFTC Chairman, Rostin Behnam, made a statement welcoming the responsibility. Saying that tips from the public brought to the CFTC resulted in almost 60 enforcement digital asset-related cases, including a recent matter involving a $1.7 billion fraudulent bitcoin scheme.
Long Road Ahead
The bill requires support from the House Agriculture Committee and the full House before being submitted to the White House for consideration. However, it remains uncertain whether the Senate will have time to bring this bill to the floor for a general vote during the current congressional session.
There is a potential for the process to move along more quickly if the Digital Commodities Consumer Protection Act and the Responsible Financial Innovation Act receive support. Both bills propose CFTC’s regulation of cryptocurrency and present the potential to be combined and reach the Oval Office more rapidly.
The legislation attempts to address uncertainties preventing the developing crypto industry from maturing. The success of this legislation would establish new federal laws regarding stablecoins, taxes on small-scale payments, and regulatory authorities.
Debate Continues for Strategic Framework
The Crypto Council for Innovation CEO, Sheila Warren, testified to the wide range of opportunities and use cases for crypto, highlighting the need for deliberate design choices in policy making. She pointed out the global nature of crypto and how Defi fundamentally differs from the centralized spot market models we see today.
Conversely, Todd Phillips from the Corporate Governance Center for American Progress testified that retail investors face elevated risks from crypto and that crypto has had a negligible effect on financial inclusion. He asserted that crypto assets can be securities, commodities, banking products, or non-fungible tokens and may be subject to existing statutory provisions.
Despite the differing expert perspectives on the public harm or opportunity presented by crypto assets, all experts who testified to the Committee agreed that more clarity is needed to build a strategic regulatory framework for crypto. The main point of contention was if the CFTC has jurisdiction to be the exclusive crypto regulator.
Conclusion
Digital assets have rapidly grown in popularity, and blockchain technology is starting to impact how international markets operate. However, a need for strategic consumer protection is needed. Today, a regulatory patchwork of state-level laws controls a substantial portion of this rapidly expanding market. The multiple bills proposed in the United States Federal government are proof of the desire to form and implement a strategy to safeguard customers from fraud without hindering American innovation.
