Leaders of the Senate Agriculture Committee launched a invoice on Aug. 3 to make the Commodity Futures Buying and selling Fee (CFTC) the chief regulator of digital belongings which might be commodities.
The CFTC presently regulates the derivatives market corresponding to futures and swaps however not underlying commodities.
In line with the invoice, the CFTC would get “unique jurisdiction” over cryptocurrencies that qualify as commodities. The invoice proposes to amend the definition of ‘commodity’ within the Commodity Trade Act to incorporate “digital commodity,” which incorporates the 2 largest cryptocurrencies — Bitcoin (BTC) and Ethereum (ETH) — and some other tokens not deemed to be securities.
The CFTC would oversee all digital commodities trades besides these the place digital belongings are used solely for the aim of shopping for or promoting items or companies, in accordance with the laws.
The nitty-gritty of the invoice
The Digital Commodities Client Safety Act of 2022 would make it obligatory for all crypto companies dealing in digital commodities to register with the CFTC. The invoice proposes that brokers, custodians, and buying and selling platforms be registered below separate classes, though mining firms wouldn’t be required to register.
The invoice may even impose an obligation on crypto buying and selling companies to reveal sure details about the digital commodity contracts listed on their platform. This would come with the working construction and system of the commodity, buying and selling quantity, and volatility, in accordance with the invoice.
The laws will empower the CFTC to set guidelines governing margined, leveraged, or financed digital commodity trades together with making certain fraud prevention. The Fee may even be entrusted with growing guidelines for shopper safety, like requiring buying and selling companies to reveal conflicts of curiosity, clearly stating materials dangers, and setting requirements for the advertising and marketing of such platforms.
With rising concern across the power consumption of digital belongings, the CFTC could be required to maintain an up to date report of how a lot power is used within the creation and switch of the belongings, in addition to the sources of power. The Fee could be required to publish the power consumption report on its web site, in accordance with the invoice.
Whereas the Securities and Trade Fee (SEC) has been vying for the function of high regulator of cryptocurrencies, the brand new invoice will permit crypto platforms registered with the CFTC to additionally register with the securities regulator.
A want come true for CFTC, even when partially
The Senate Agriculture Committee, which launched the invoice, had requested the CFTC to supply extra steering on digital belongings in January.
In a listening to earlier than the identical Committee in February, CFTC chairman Rostin Behnam requested lawmakers to introduce legal guidelines that will grant the Fee the authority to control money markets for sure cryptocurrencies. Whereas the present invoice doesn’t go up to now, it’s a step in the identical route.
Coin Heart, an trade assume tank, supported the invoice in a weblog put up however warned that:
“There’s a severe threat of overreach and unintended penalties when registration is obligatory relatively than non-compulsory.”
Coin Heart additionally cautioned that the present definition of “seller” within the invoice is simply too broad and requires clearer language to make sure that “odd consumers and sellers of cryptocurrency are additionally not swept right into a registration regime.”
It’s value noting that the crypto trade has been hankering for clear definitions of digital commodities and digital securities. This would offer readability to crypto platforms on which companies — the CFTC or SEC — they should register with. Nonetheless, whereas the brand new invoice defines ‘digital commodities,’ the trade nonetheless has to attend for a definition to determine which digital belongings are securities.